Buzz
When you started your job, you may have been asked to sign a non-compete agreement. This document restricts you from joining competing companies in the same industry or sector once you leave your current employer, for a set duration and within a defined geographical area. At the time of signing, you probably didn't pay much attention to it, especially since you were just settling into your new role. But when you decide it's time to move forward, such an agreement can significantly limit your job options. To help you, many states have implemented laws that curtail the reach of non-compete clauses, and judges tend to be hesitant about enforcing them. This makes it easier for you to challenge and potentially escape the non-compete you signed.
Steps
Requesting a Waiver
Obtain a copy of the agreement you signed. Reviewing the non-compete agreement carefully will help you understand what interests the company is trying to protect and what you should highlight when asking for a release.
- First, confirm that you actually signed the agreement and that a corporate representative with authority to bind the company also signed it. If both parties didn't sign, the non-compete is not legally binding.
- If the non-compete agreement in your HR file is unsigned by either party, a court won't enforce it. This gives you leverage when negotiating to get out of the agreement, since there may technically be no agreement at all.
- Assuming the agreement is properly signed, examine the clauses outlining your former employer's obligations. If any of those obligations weren't met or have changed, the agreement may no longer be enforceable. This also applies to any role or job title you held within the company.
- For instance, if you signed the non-compete as a sales representative but now hold a sales manager position, the original non-compete may no longer be enforceable unless you signed a new agreement for the management role. Put simply, while the original non-compete applied to your previous role, it might not apply to your new one.
- Courts primarily consider whether your employment circumstances have changed. If your job duties, authority, or compensation have shifted, the old non-compete may no longer be valid.
- Also, carefully assess the scope of the agreement. The job you're aiming for might not violate the non-compete. For example, if your non-compete prohibits working for a company that uses "similar technology" to your previous employer and your new employer uses different technology, the non-compete likely doesn't apply, even if both companies operate in the same field or provide similar services.
Consider the nature of your job within the company. Non-compete agreements are designed to protect trade secrets, confidential information, and valuable business relationships. The reason companies ask employees to sign them is to prevent the possibility of taking clients to a new company or using proprietary knowledge for personal or corporate gain. However, if your role didn’t involve direct interactions with clients or exposure to trade secrets, then the non-compete agreement likely isn’t enforceable against you.
- For example, some companies require all employees to sign a non-compete, regardless of their position. If you were hired as a receptionist and are now offered a job as an executive assistant elsewhere, it’s unlikely that you possess any confidential information or client relationships that could be used against your current employer.
- Non-compete agreements, like other contracts, require valid consideration—meaning your employer must have provided something of value in exchange for your agreement. If no additional benefits were given to you, or if you were promised compensation that never materialized, the agreement may be void.
- In certain situations, simply continuing your employment after signing the non-compete may be enough to constitute valid consideration. This would apply if, for instance, your job was categorized as "at-will" employment, and no other employment contract was signed.
Examine the laws of your state. Many states have specific laws that govern the enforcement of non-compete agreements. It's possible that your agreement was signed before such laws were enacted, which could make it outdated and unenforceable. Check local government websites or review state-specific overviews like the one from the Center for American Progress: https://cdn.americanprogress.org/content/uploads/2019/04/02054652/State-Noncompetes-table1.pdf
- States like California and North Dakota no longer allow non-compete agreements under any circumstances, making them void in those states.
- Other states restrict the kinds of legitimate business interests an employer can protect through non-compete clauses. For example, in Washington, non-competes are only allowed to protect customer contacts and company goodwill.
- Some states, including Tennessee and Texas, allow non-competes but exempt certain professionals, such as physicians. In all 50 states, attorneys are exempt from non-compete agreements as per the ABA’s Rules of Professional Conduct.
Prepare your case. Organize your key points and concerns to ensure you’re ready for an objective discussion about getting released from the non-compete agreement.
- If you've found legal defenses to challenge the agreement, present these to your employer early. Keep in mind, employers face an uphill battle enforcing non-compete clauses, as judges generally dislike agreements that interfere with your ability to find work. If you can show you’d likely win in court, the company may prefer to settle beforehand, avoiding the expense of a trial.
Request an in-person meeting. Arrange a face-to-face meeting with a key decision-maker, such as your manager or an HR representative, who has the authority to release you from the agreement.
- Begin the meeting by clearly stating your goal, backed up by the points you've prepared and the research you've conducted.
- Present your defenses and emphasize your intention to leave on good terms. If you’re open to compromises, you may be able to find a middle ground that allows you to take the new job. For instance, if you previously worked in sales and the company is concerned you might take clients with you, you might agree to a deal where you join the competing company, but without contacting any of your former employer’s clients.
Negotiate the terms of your release. It may be possible to create a new agreement that protects the company’s interests while allowing you to pursue the job you want.
- When negotiating, focus on the duration of the restrictions, the geographical area, and the types of activities it prohibits. These are the central points of any legal challenge, and unreasonable terms are likely to be dismissed by a court.
- Since you already have another job offer, reducing the time limit on the agreement probably won’t be very helpful. For instance, if the agreement prevents you from working for a competitor for 10 years, shortening it to 5 years won’t change the fact that your new job still breaches the terms.
- Sometimes, geographical boundaries can be used to carve out exceptions. For example, if your current employer operates solely in Tennessee, but you have a job offer in California, your non-compete might prohibit you from working for a competitor anywhere in North America. However, as the California company doesn’t compete with the Tennessee business, you could potentially negotiate a new agreement limiting restrictions to Tennessee only, making the agreement less restrictive for you.
Get any agreement in writing. Since your initial non-compete agreement was in writing, any modifications or releases must also be documented in writing.
- Make sure both you and someone from the company with the authority to bind it (such as a senior executive or hiring manager) sign the new agreement, and that it specifically references and addresses the original non-compete agreement.
Going to Court
Receive notice of the lawsuit against you. If you choose to disregard the non-compete, your former employer may decide to take legal action.
- Typically, the only way to challenge a non-compete is by violating the agreement and waiting to be sued.
- Even if your former employer hasn’t sued other employees over the non-compete, this doesn’t mean they won’t take legal action against you. The absence of past lawsuits isn’t a legitimate reason to ignore the agreement, as each situation is different.
- Your former employer may seek a temporary injunction, a court order that prevents you from working until a final ruling is made. You’ll need to attend a hearing before a judge can issue this order.
- In many cases, the hearing for the temporary restraining order will be the only court appearance, since if the judge upholds the non-compete, you will be barred from working and will need to find another job that doesn’t breach the agreement.
Consider hiring an attorney. An employment attorney with experience in non-compete cases can help protect your interests.
- A local lawyer will be familiar with the judges in your area and the legal landscape in your state, which can be valuable when challenging a non-compete. The lawyer can leverage their knowledge of a judge’s tendencies to strengthen your case.
- This is crucial in non-compete disputes, as the outcome often depends on how a judge views the reasonableness of the restrictions imposed by the agreement.
File your response to the lawsuit filed by your former employer. If you've been sued, you must submit your formal answer to the complaint, typically within 20 days.
- The complaint outlines the claims your former employer is making and explains why they believe they are entitled to relief from the court. In your response, you'll address each of these claims and indicate whether you admit, deny, or don't have enough information to respond to each one.
- Your answer is your chance to present your side of the story and introduce any defenses or counterclaims that may be relevant to your case. For example, if your investigation reveals that the non-compete agreement was not supported by adequate consideration, you can bring that up as a defense.
Engage in the discovery process. Discovery gives you the opportunity to gather crucial information from your former employer while building your case.
- During discovery, you can submit written questions to your former employer, which must be answered under oath, or you can request documents such as HR records.
- A key part of discovery might involve learning whether your employer has sued other employees for breaching the non-compete and the results of those lawsuits. If past employees have successfully challenged the non-compete agreement, you could use those precedents in your own case.
- Depending on whether your former employer has asked the court to issue a temporary restraining order to prevent you from violating the agreement, you may be on a tight timeline to obtain this information.
Prepare your defense. Reviewing previous legal cases in your state can provide insights into what judges have found reasonable and what kinds of non-compete agreements they have ruled against.
- By examining your state’s laws and past rulings, you can get a better understanding of which defenses you’re most likely to succeed with.
- Part of this preparation involves analyzing the non-compete agreement you signed to see if it meets the legal requirements specified by your state’s law.
Consider using mediation. A neutral mediator may be able to help you and your former employer reach a mutually acceptable settlement, allowing you to take a new job without damaging the company's interests.
- Mediation gives both parties some control over the outcome, unlike a judge's ruling, which is final and outside of the parties’ hands.
- Additionally, mediation proceedings are confidential, so your employer won’t have to worry about the details of the non-compete dispute becoming part of the public record.
Organizing Coworkers
Consider forming a union. Employees may opt to form or join a union if they're unable to convince their employer to lift non-compete clauses.
- For example, the editorial staff at Law360 successfully had their non-compete clauses removed while simultaneously organizing a union. The editorial team voted to unionize after the non-compete clauses were eliminated through a settlement between Law360 and the New York Attorney General, just weeks before the unionization vote.
- In general, unions do not support the inclusion of non-compete agreements in contracts with employers.
Negotiate as a group. Employees can negotiate collectively to have their non-competes removed with the protection of the National Labor Relations Act (NLRA).
- In a new strategy, two or more non-supervisory employees sharing a “community of interest” can form a "pop-up employee association" to negotiate with their employer to eliminate non-competes under the NLRA's protections.
- Small employee groups, such as 30 cosmetics counter workers at a Macy’s or workers at a mobile phone retail store, have successfully met the "community of interest" standard in previous cases.
