Non Compete clauses / contracts

[Big Cuddly Bear]

My wife was laid off 2 weeks ago, but has already found a new job. Before she can actually start though, her company wants her to sign a non compete contract.

Now, my understanding of these is that to be upheld in court, the contract must be reasonable in scope for the employee.

The contract they want her to sign has her not being able to work ANYWHERE on Earth, for a competitor, for a period of one year.

Now, I don't know a lot about what PA law says about that, but I did a little reading on PA contract law, and it seems to me that this would be considered unreasonable in scope.

So, my wife called up her buddy who is a big wig at another pharmaceutical company and he told her that they COULD enforce it, but that they would have to pay her one year's salary - which makes sense to me, and would be acceptable to my wife. But her new company has no mention of her getting paid if she gets fired, laid off, or quits.

So, what do you think?

She is meeting with her new boss tomorrow - the one who was responsible for her getting the job - and plans to have a discussion about this.

 

[bunkkinsmom]

I have limited knowledge, but I will tell you what I know.
I used to work with Starbucks, and our VP for our region was a man named Paul Twohig. He was with the company for forever. He left Starbucks and went to work for Panera in 2003, and then back with Starbucks for a few years. He took a severance package in 2009 and went to work for Duncan Donuts. Starbucks sued him over his non-compete clause, and won.

IMHO I think that non-compete clauses are like prison sentences. I mean I get the principal, but if you have worked in coffee/retail for 20 plus years and you have a non-compete clause that says if you leave you can't work within 50 miles of a Starbucks, how do you ever leave? I mean, 50 miles of a Starbucks? You can't swing a cat without hitting a Starbucks in 90% of American cities. Ridiculous.

But I'm not bitter!

 

[bicker]

Non-compete clauses are likely to be thrown out if the detachment from employment is involuntary (on the employee's part) - they cannot effectively prohibit you from working. They can, however, (and are intended to) keep you working for them.

 

[Kimberle]

In some states, they are illegile. I'd try calling the Dept of Labor in your state and ask abt your specifics.

 

[deegack]

Cross it out initial and see what happens. She cansay she's uncomfortable having it in there

 

[simba20]

IMHO I think that non-compete clauses are like prison sentences. I mean I get the principal, but if you have worked in coffee/retail for 20 plus years and you have a non-compete clause that says if you leave you can't work within 50 miles of a Starbucks, how do you ever leave? I mean, 50 miles of a Starbucks? You can't swing a cat without hitting a Starbucks in 90% of American cities. Ridiculous.

But I'm not bitter!

Up until July, I lived in a place that was a good 50 miles from a Starbucks. LOL! I don;t know how I survived. Now I live in a place that is at least 5 miles, but a 15 min drive (sigh welcome to the city and traffic). I wish they would build one in my suburb....just one is all I am asking for.

 

[Green Tea]

Non-compete clauses are likely to be thrown out if the detachment from employment is involuntary (on the employee's part) - they cannot effectively prohibit you from working. They can, however, (and are intended to) keep you working for them.

In my experience this is not correct. They are generally upheld even if the employee was terminated for lack of performance.

But to the OP, if an evergreen clause was not part of the employee's contract, they do not need to pay the year's wages upon termination.

 

[golfgal]

Non-compete clauses for your average worker rarely hold up in court. Those designed for high up executives are pretty inclusive and DO hold up in court. A one year non-compete isn't all that difficult to get around usually, it's the 5 year ones that a lot of executives have that are very hard to manage. I can see why a company would want an employee in a computer department to sign one though-they have access to pretty much everything that goes on in a company.

 

[DrCavin]

My friend got sued by his former employer for violating a non-compete clause. He lost the case & was ordered to pay $50K to his former employer. Yes they can be enforced & they are not just for executives.

 

[LuvCuteBoys]

What kind of industry is it? I've never heard of such a thing! In banking, people flit back and forth between companies all the time.

So... if your job (the OP) was such that you had to move out of state... your wife wouldn't be able to work in the same industry until a year was up? That sounds horrible to me. What's the reasoning?

 

[wdwiala]

No way would I sign it. I was under an impression that they can't keep you from making a living. Not working on a computer sure limits your possibilities.

 

[cabanafrau]

In the half dozen or so non-compete lawsuits I have seen this year, the clause has not been upheld every time. If I remember correctly, each of these was in regards to sales positions.

The kicker is, each case was at least two years old and at the very least are now waiting in queue for consideration at the appellate level. Many of the cases have had motions or other aspects of their case reviewed in appeal already. In other words, very, very expensive cases to both parties.

The key to remember is, if a non-compete clause or any other aspect of a contract can be upheld legally, it must offer some type of consideration to both parties on its face.

 

[tasha99]

I'm in grad school to be an slp, and in a school mtg on working in the medical profession, we were told to be somewhat careful about non-compete clauses. One of the slps that talked to us told us that a company came after her for $$ years after she had quit with one staffing agency. I just know what I've been told, but I think I would consider anything I signed as binding and not go on the assumption that it isn't.

 

[DisneyBamaFan]

I work in an industry in which every executive, manager and sales person is required to sign a non-compete. In some states, they are unenforceable, by law. In other words, some states do not recognize them.

We have found that the courts frown on an employer trying to enforce a non-compete if the employee was terminated (for any reason short of trying to steal clients before leaving). We have also found that the courts ask us to show potential damages before they enforce a non-compete. With senior management, that is easy. With sales staff, it is harder, but it can be done. With the rest of the staff, it is almost impossible. We haven't tried to enforce a non-compete for anyone that wasn't sales staff or management in decades. The courts just don't like it.

So, if your wife is in management and she decided to leave on her own, she would need to be careful not to talk to any of her employees before leaving, and not contact them for at least one year after leaving - otherwise she risks losing a non-compete suit. Even friendly calls having nothing to do with work can lead to a suit.

If your wife is in sales and she leaves on her own, she cannot contact any of her clients, leads or prospects obtained while working there. If she does any of those things, she could really get hammered.

However, in my experience, if you follow those basic rules, the courts will protect you from an unrealistically restrictive non-compete. You have a right to earn a living. You just don't have a right to do so at the expense of your former employer.

 

[BELLE1109]

the case of this varies greatly state to state. From the limited info I have, its seems that the scope of this clause is far too broad. Why is she signing it after she was let go? These are typically signed upon hire. Is this part of a severance package?

 

[DebbieB]

The son of a coworker left his job in the medical equipment industry to start a new company with some partners. They started the company and all was going well until it was discovered one of the partners had a non-compete clause from the prior company. It went to court and they had to shut down and he lost tons of money.

 

[Micca]

I'm in an industry where non-competes are common,and believe me, this question is more complicated than it seems. If the non-compete is a major concern, have an attorney take a look at it.

 

[bicker]

Cross it out initial and see what happens.

I used to think that would be valid, but I remember reading something, or perhaps hearing a report on the radio (maybe Neil Chayet) saying that you can't cross-out tenets of boilerplate offerings, without getting explicit assent of the other party, and expect your cross-out to have any weight. It seems counter-intuitive, because the cross-out shows that there wasn't a meeting of the minds, but the principle evidently is that you should know that without assent you can't unilaterally strike out a standard provision in boilerplate.

 

[bicker]

In my experience this is not correct. They are generally upheld even if the employee was terminated for lack of performance.

Hmmm... to be honest, I wasn't thinking of that scenario, but rather a lay-off situation. I do know, for sure, that the clauses are generally not enforceable in those cases. I am a little surprised that they'd be upheld in termination-for-cause situations, though.

 

[RadioNate]

Hmmm... to be honest, I wasn't thinking of that scenario, but rather a lay-off situation. I do know, for sure, that the clauses are generally not enforceable in those cases. I am a little surprised that they'd be upheld in termination-for-cause situations, though.

If you collect severance they are enforceable even in termination-for-cause cases. DH works and I worked in an industry where nearly everyone from executives to FT hourly workers have non-competes. If you are contractually entitled a severance then the non-compete generally stands even if you are fired for cause.

If there is no severance, in my experience they are harder to enforce and courts will generally allow the person to make a living. I had a friend in sales that was let go for performance and challenged his non-compete. He was allowed to take a sales job for a competing employer but could not call on any of the same clients. It was ad sales and I think he was barred from calling on anyone who had current contracts with his previous employer.