Non-Compete Clause

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NM68657

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Anyone have experience regarding a Non-Compete Clause at work? Someone I know is thinking about dumping his job and starting his own, but he signed a non-compete contract. He is worried that his boss will take him to court if his clients follow him. Do such contracts hold any weight?
 
Depends on where you are and how much you know. In most cases, they don't carry much weight and the legal expense a company would have to go through to enforece them would be more $$$ than it is worth.

An engineer with his name on company patents and knowledge of company secrets - yeah, they might take him to court. A salesman taking clients with him? Doubtful.

If in doubt, see a lawyer. That said, I've signed these things before and gone on to seek employment with a 'competor' and my former employer never found out. Or if they did, they didn't care any longer.
 
Taking clients with you when you leave is dicey, even if you don't sign a non-compete. A lot would depend on the business and the scarcity of clients. I've seen them enforced, I've seen them ignored.
 
What business is it, anyway? I have some collegues who came over from Merrill Lynch, and this was a huge issue for them. Again - drop the dime for a lawyer.
 
It can be a grey area.. the issue is that the clients are free to take their bussiness where ever they want.. the problem is if the company can prove that you intentionally took the clients with you.. like if you take your client list and then call them all up and ask them to switch.. but if you tell them in casual conversation that you are leaving.. and they come find you.. then it wasn't really of your doing

SpamDog
 
Non-competes are big in radio. They used to be only in the big markets to keep jocks from taking listeners to the station across town, and with sales reps with supremely loyal clients with them if they changed stations. Now a lot (but not all) stations have you sign em' no matter what size the market. Like david said, I've seen it enforced, and i've seen it ignored. In the end, the best route is a lawyer. While the concept of a non-compete is a joke, the legality of it CAN hold up in court.

Ize
 
In my state of Oregon it does hold a significant amount of weight. But i will tell you what, in California HA! Absolutely worthless there.
 
What's the time table on the non-compete? Everyone in my company signs one whether you're a VP or a retail salesperson or a call center employee. I've seen retail folks jump to competitors without reprimand; we did have a VP try to go to a competitor and the courts said she couldn't for the 1 year duration of the contract.

If it's a short enough time frame, he might consider waiting until it expires before starting his own business. I don't know if that's an option with him not having income for that period of time... but it was just a thought.
 
He'll probably have to wait it out, but there are ways of somewhat avoiding this. Starting a business doesn't happen overnight and if he gets his stuff ready and then registers with the state, by the time it goes through the year will either be up or close and if he can maintain not doing business with former customers then he should be in the clear.
 
We actually covered this in my business law class not long ago. If the contract is reasonable in lengh of time to not compete and doesn't prevent him from earning a living, it will hold up in count and your friend can be held liable for the losses of the original employer.

Typically, 1 year seems to be the line where it's reasonable for someone to go after customers, but I've read cases where 3 years was considered fair.

Tell him to get a lawyer. A lot of his options depend on the language of the contract he signed. If it's well constructed and reasonable, he could be liable for a big chunk of change for breaking the deal. If he was FORCED to sign the contract after he was employed as a condition of employment or if the language is too restrictive or unreasonable, it's garbage.
 
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