You pay a lawyer to write a bulletproof contract. Then you have to pay a lawyer to go to court to make it stick. Then the judge rewrites it to the point that it doesn’t do what the parties agreed. Look at Paradise v. Midwest Asphalt Coatings, issued March 16, 2010 by the Missouri Court of Appeals for the Western District of Missouri.
Bob Paradise signed an employment contract with a “non-compete clause,” promising that he would not solicit customers of Midwest Asphalt if he ever left the company. After seven years, Bob quit and started his own company with a similar line of business.
While Bob didn’t solicit customers of Midwest Asphalt, he wasn’t comfortable with the non-compete. He sued Midwest, asking the court to determine that the non-compete clause was illegal. Bob also asked for what he said were unpaid commissions from Midwest and for his attorney fees relating to the litigation.
Many kinds of agreements restraining trade are illegal, but non-compete clauses are legal if they are reasonable in duration, geographic scope and other terms. The law protects and will enforce a non-compete clause that protects an employer’s reasonable interest in trade secrets and customer lists.
Courts balance the employer’s legitimate interest in confidential information with a person’s right and necessity of a person to change employers and continue in the same line of work.
After Bob sued Midwest, Midwest countersued, asking the court to enforce the non-compete to the extent that it was reasonable and to order that Bob not violate it. Midwest also asked for attorney fees.
The trial judge determined that the non-compete had a couple of problems. It lasted too long, and its provision relating to attorney fees wasn’t fair. The trial judge shortened the duration of the non-compete to 26 months from January 15, 2008. The judge threw out the attorney fee provision completely.
If the appellate court opinion had revealed that the duration of the non-compete was 10 years, for example, then employers would argue that a 9.9-year term was reasonable. So the appellate court chose to avoid disclosing the duration of the non-compete clause that the trial judge held to be unreasonable. Nor do we know the content of the illegal attorney fee provision.
By the time the appellate court made its decision, 26 months had passed.
So what’s reasonable?
I have been asked to sign an agreement as an independent contractor that if I leave the organization I’m currently contracting with, I agree to not practice any aspect of the same profession for 2 years within 60 miles of any of the company’s other independent contractors.
Meaning, if, for example, I was a martial artist with a certain school, I would be agreeing to not practice ANY form of martial arts for 2 years within 60 miles of anyone ever trained at that school. Or if I was an Avon Lady, I could not sell Mary Kay (or any other make-up) for 2 years if I left Avon and there was an Avon lady within 60 miles, as an example that would be equivalent.
Is that enforceable?
You need legal advice. I do not provide legal advice on this blog. Hire a lawyer in your community.
Regarding non-compete agreements, the law of each state varies. The general rule is that non-compete covenants will not be enforced by a court unless they are reasonable as to duration, scope of prohibited activities, and geographic scope. A lawyer in your state can review the case law and any applicable statutes.
@Curious – definitely get a lawyer and if the terms of the non-compete seem severe to you, then make sure to negotiate them down before you accept the job!