Recently, I joined a lawyer message board on LinkedIn called, Non-Compete Lawyers. It appears that many represent those seeking to enforce non-compete agreements. One message thread expressed the general view that non-competes were beneficial and should generally be enforced. This is my response, which contain my ideas about how non-compete law should evolve:
I disagree. I think non-competes are abused, take advantage of unequal bargaining power, act as a tax on new businesses (litigation expense) and harm the public interest. First, my general view in regards to non-competes in the employment context is as follows:
1. Non-competes should only be enforced, if at all, in the RARE instance when there is a truly compelling interest to protect (preserving customer relationships does not meet this standard in my imaginary fiefdom);
2. I think the way to protect relationships with key employees who represent a real competitive concern is to sign them to term contracts; employees who terminate prior to the end of term may be prohibited from competing under a more traditional contract approach. Otherwise, I would require the employee subject to a non-compete be paid severance during the non-compete period, which in no event should ever exceed 1 year.
3. I would give most significant weight to the public interest and create a presumption that non-competes always against the public interest.
4. There should be no blue-penciling so as to discourage any drafting of overly broad non-competes. And making the signing of an overly broad non-compete a condition of employment and/or trying to enforce such a non-compete should be an unfair trade practice. Remedies under the unfair trade practices act should be available to employees and consumers against those who use and/or attempt to enforce overly broad non-competes.
5. Terminating an employee for refusing to sign a non-compete after employment should constitute wrongful discharge in violation of public policy. (Although it might make more sense to limit this to overly broad non-competes in cases of promotion, where severance is part of the consideration for a non-compete.)
6. Non-competes should never be enforced when an employee is terminated for any reason that does not justify cause. I am new to this group.
As you can guess, I primarily represent employees. I am starting a blog Beat Your Non-Compete, but it is in the early “beta” stage. I cannot recall a non-compete in an employment case that was truly needed. Most are used to protect employers from competition, and seem to rooted in the old Master-Servant view of the employment relationship. Companies do not own their employees’ minds nor their customers businesses.