What to do when it's time to walk away.
We’ve all been there: stuck in a dead-end job, underappreciated, and ready to cut ties. But what if you signed a little piece of paper during orientation—something you didn’t even think twice about at the time—that now could prevent you from finding fulfillment elsewhere? Today, employers across all lines of work are using company-wide non-competes as a means of employee retention. If you are staring down the barrel of a lawsuit for wanting to find a better fit, there may be a light at the end of the tunnel. Here are the top 5 ways to get out of a non-compete.
- Look at the line of work. Some lines of work are not appropriate for non-competes. Traditionally, a non-compete agreement or clause has been used to stop those individuals with unique talents or crucial information from jumping ship from one employer to their competitor, spilling all their secrets, and thereby cutting the knees out from under the first. In fields like telecommunications and sales, where a trade secret or top salesman can make or break the business, this makes sense. However, while a worker may be a skilled laborer or great employee, it’s not always appropriate to restrict them from moving on. Non-competes in industries like plumbing and retail tend to be frowned upon.
- Consider the consideration. Non-competes are contracts. In order for a contract to be upheld, there has to be “consideration”—essentially, each party to the contract must agree to receive a benefit or bear a burden. That’s easy to see when looking at a contract for sale of goods: Customer A agrees to buy 20 bows from Seller B for $10. A will benefit from getting the bows, while B benefits from getting the money. The same applies when evaluating a non-compete. Many employers will have their workers sign the non-compete as part of the onboarding process. Most often, a court will see the offer of employment as sufficient consideration for signing the non-compete. But, if you were already working for your employer for a period of time and then were suddenly required to sign a non-compete—without getting a raise or promotion, for example—the non-compete contract may lack consideration. That may be enough for a court to find it unenforceable.
- Delve into duress. As an extension of the consideration argument, another way contracts may be found unenforceable is if one party signed it against their will. In a similar situation to above, where you were given a non-compete to sign after a period of employment, what happens if the employer threatened to fire you if you didn’t sign? And what if they knew you have three kids at home and are the primary provider for your family? A court may view that situation as having signed under duress. Just like you can’t force someone to give you money by holding them at gunpoint, an employer can’t require an employee to keep working for them by threatening their livelihood.
- Reasonableness requirement. Most courts evaluate a non-compete under some version of a reasonableness standard. Even the bio-tech company with the billion-dollar trade secret can’t restrain their key chemist from working for any other employer for the rest of her life. Often, the purpose of a valid non-compete is to allow the former employer to recover from the loss of that employee—by finding someone of equal skill to take their place or by getting that new product on the shelves, for example. Generally, a time frame of a year or two is long enough to complete that goal. Similarly, a mid-sized ag product company in the Midwest doesn’t tend to have clients on the coasts. Therefore, it does them no real harm if their top salesman wants to go work in Manhattan for a Fortune 500 company. Courts will usually only enforce a non-compete to the extent it is reasonable, so if yours tries to keep you from working anywhere in the US or for longer than two to three years, you may be able to fight it.
- “This is going to hurt me more than it hurts you.” Finally, even if your non-compete would otherwise be enforceable under the above tests, you may be able to convince a judge that the detriment to you far outweighs any benefit to your former employer. Because employers are often in the position of greater power when it comes to bargaining, courts are mindful that an employee may sign something that is against their best interests. If your non-compete means the only way you can leave your employer is by learning an entirely new trade or uprooting your family, a court may take judicial pity on you by finding that the employer is not entitled to enforcement. This is particularly true where the employer will not suffer any real harm from your working for a competitor in the area.
Non-competes can be an intimidating specter for anyone looking to move on and find a better fit in their work life. If you’ve signed a non-compete and are considering finding a new job, call our Sioux City, Sioux Falls, or Omaha office today for assistance in evaluating your options.