Part 1: If your employer is asking you to sign a non-compete…
The best time to get legal help with a non-compete is before you sign anything! As the old saying goes, an ounce of prevention is worth a pound of cure!
Why? Because once you sign it, you might be stuck with it! One of my mentors in law used to tell clients “don’t sign any document that you’re not willing to live by,” even if you don’t think it’s enforceable or fair. The law is filled with gray areas, and non-competes are definitely one of those areas.
Non-competes are supposedly disfavored by Indiana law, but that doesn’t always feel true. Courts generally say that in order for a non-compete to be valid, it must seek to protect a legitimate protectable interest of the employer. In other words, non-competes are enforced when something about the competition would be unfair to the employer.
Some examples of things that would be legitimate protectable interests: the formula for Coke, the Colonel’s blend of 11 herbs and spices, or the design of the next generation iPhone. These are things that would be damaging to the employers if they were not protected. Obvious stuff, right?
Another thing that’s often protected is a business’s “goodwill” – its relationships with its customers or clients. You’ll find that a lot of businesses want non-competes with their sales personnel so that they can’t be recruited by competitors to take their customer relationship and the “goodwill” that has been built up over to the competing business.
But businesses try all the time to stick employees with non-competes with no legitimate protectable interest. If you’re working as a salesperson making cold-calls from the phone book, there’s probably not much about that position that would make it unfair for you to go start making those same cold-calls for another employer.
There’s also probably not much reason to think that your work in human resources for one employer ought to restrict you from working as a salesperson for a different employer.
Before you sign a non-compete, it’s good to review with an employment lawyer to figure out whether there’s really a legitimate protectable interest. Even if your employer is going to require you to sign the non-compete, it’s good to get advice in advance so that you can make a wise and calculated decision going into it, rather than trying to deal with it after you’ve already signed it.
It’s also a good idea to figure out whether the scope of the non-compete is going to be reasonable. If the company that you’re going to work for only serves customers in Lafayette and West Lafayette, Indiana there’s no reason why you ought to be restricted from competition in Cleveland. If your job is to sell farm machinery there’s probably no good reason for a non-compete to restrict you from going to another employer to sell software to schools.
Plus, it may very well be the case that advice before you enter into the agreement is important if you end up in a legal dispute down the road:
“When an employer hands an employee an employment agreement with a covenant not to compete, the employee is of course entitled to consult a lawyer before signing the agreement. If the employer has drafted an unreasonably broad covenant, the employee should be entitled to rely on sound advice that the covenant is simply not enforceable under Indiana law. That employee’s intent may well have been not to agree to any enforceable restriction. That same employee could sign quite happily a covenant, knowing that the courts would shred it.”
That potentially signals that a Court might look to see whether you’ve gone and gotten that advice!
Jason Ramsland of Ramsland Law is experienced at evaluating and giving good advice about your non-competes, and he’s ready to help! Remember that the ounce of prevention is often worth a pound of cure, so getting advice early is important.
The next installment will address how to go about considering leaving your job when you have a non-compete in place already.