In limited situations, an employee might attempt to obtain injunctive relief but it would be available only where the employer has somehow already prohibited the employee from otherwise working.
Money damages would be available for both sides of the litigation depending upon who prevails on the underlying issues. Unfortunately, litigation costs can be expensive and result in neither party benefiting in pursuing the matter to that end.
The fact that lawyers are specifically prohibited from participating in non-compete agreements is telling as to the utility of such documents. Although lawyers actively participate in the preparation of such documents for other professionals and employees, the ethical guidelines published by the American Bar Association states: "A lawyer shall not participate in offering or making: (a) a partnership or employment agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement (American Bar Association, 2004: Rule 5.6)."
Interestingly, the reasons offered for this position by the ABA, and supported by the courts, are that such restrictions interfere with clients' choice of counsel and the attorney-client relationship and are, therefore, considered a violation of public policy but the same rationale has not been applied universally to other employment situations.
In recent years there has been more and more concern expressed by the courts that question the basic fairness of non-compete arguments. Some courts have raised the question as to the moral right of employers to impose such conditions on their employees. One court explained this concern by stating: "The average, individual employee has little but his labor to sell or to use to make a living. He is often in urgent need of selling it and in no position to object to boiler plate restrictive covenants placed before him to sign. To him, the right to work and support his family is the most important right he possesses (Arthur Murray Dance Studios of Cleveland v. Witter, 1952: 703-04)."
Non-compete agreements serve a valuable function for employers but they interfere substantially with an employee's right to work and they also interfere, at least in the case of professional relationships, with the public's right to do business with whomever they wish. Enforcement of non-compete agreements can result in former employees having to move substantial distances in order to continue practice their trade or profession and also require potential clients, customers, and patients having to do the same in order to maintain their business relationship with the employee. In this sense, non-compete agreements serve as a restraint of trade and place a major burden on both the former employee and the consumer.
Non-compete agreements remain a popular part of employment contracts in a number of business disciplines despite the strong criticisms that have been leveled against them. Historically, non-compete agreements have not been popular and for most of the period since the Industrial Revolution have been prohibited. In recent years, state legislatures began recognizing non-compete agreements and began to allow their use subject to statutory limitations but the courts have begun again to limit their use.
Due to the present legal environment surrounding the use of non-compete agreements, employers seeking to utilize non-compete agreements as a method of protecting their business' interests should be careful in how the agreement is drafted. The fact that these documents are being viewed with such great scrutiny by the courts requires that employers using such instruments be careful to draft their documents as narrowly as possible so that they are not viewed as overreaching if and when it becomes necessary to enforce the agreement. Overreaching in any form may be viewed negatively and result in the entire agreement being declared unenforceable by the court. In the event that the agreement is declared as unenforceable the employer may be opening himself to considerable aggravation and expense and any advantage gained by the enforcement may be obviated by the legal proceedings.
For employees facing the possibility of signing a non-compete agreement, there are similar considerations. Most individuals do not want to consider what might happen when one leaves a new employer but the prudent individual must do so. Agreeing to sign a non-compete agreement may seem like a routine part of any new employment situation but it can have a long-lasting effect. As deciding not to sign such an agreement may mean the loss of employment, most potential employees will decide to sign but if the opportunity is presented to limit the scope and duration of such agreement the employee should take such opportunity. The enforcement of a non-compete agreement can have disastrous effects on an employee and his career. Even if the agreement is eventually declared unenforceable by a court, the process of litigating such enforceability would be cost prohibitive. The better course of action is for new employees to be foresighted and address the issue before beginning employment and not when one is attempting to be a new career.
Everyone associated with the use of non-compete agreements must be aware that they must be used carefully. Employers must recognize that their agreements must be reasonable and must comply with the statutory requirements of their particular jurisdictions. Courts have demonstrated that they will enforce these agreements narrowly. Employees, meanwhile, must be careful when signing said agreements that they not limit their professional and employment opportunities.
American Bar Association. (2004). ABA Model Rules of Professional Conduct. Chicago: American Bar Association.
Arthur Murray Dance Studios of Cleveland v. Witter, 105 N.E.2d 685 (Ohio Common Pleas 1952).
Cal. Bus. & Prof. Code [sec] 16600 (West 1987); Mont. Code Ann. [sec] 28-2-703 (1995); N.D. Cent. Code [sec] 9-08-06 (1987); Okla. Stat. Ann. tit. 15, [sec] 217 (West 1993).
Handler, M. (1982). Restraint of Trade and the Restatement (Second) of Contracts. New York University of Law Review, 669-776.
Malsberger, B.M. (1996). Covenants Not to Compete: A State by State Survey. Bethesda, MD: BNA Books.
Pivateau, G. (2008). Putting the Blue Pencil Dow: An Argument…