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Saturday, September 17, 2011

Signing your freedom away

“Just sign here,” my 9-year-old daughter said to her two younger siblings.  Her younger brother and sister did not think twice before signing.  My 9 year-old was quite pleased with the deal she struck.  She now had exclusive access to the optimally located desk while her younger brother and sister were relegated to sharing the older table in the corner across the room.  Two lessons can be learned from this example:  (1) I need to stop taking my work home with me; and (2) read and consider before signing.  While my wife might have something to say about the former, it is the latter I wish to focus on here.

One area in which reading and considering is paramount is non-compete agreements.  Non-compete agreements are designed to protect employers from the competitive efforts of their former employees.  Are non-compete agreements enforceable?  I will resist the urge to give the standard lawyer answer of “it depends”(although that is technically the correct answer as it is religiously taught in law schools across America that if someone asks any question about anything the answer is “it depends”).  Based on an Idaho law passed in 2008, a non-compete agreement is likely enforceable if:

  • It is limited to 18 months after separation;
  • It is limited to the geographic area where services were provided;
  • It is limited to the type of work provided by the employer; and
  • It seeks to protect customers or other business interests of the employer.

On the front-end of a relationship most employees attach little significance to signing a non-compete agreement.  Take Larry and Bob, for example.  Larry owns a lemonade stand.  Larry hires Bob fresh out of business school to sell lemonade.  The lemonade costs 25 cents a cup and Bob gets 3 cents for every cup he sells.  Larry presents Bob with a non-compete agreement which was expertly drafted by his attorney, Tommy Tort.   Bob signs the non-compete agreement without reading it.  For the next few years, Bob sells lots of lemonade.    Bob knows he could make much more than 3 cents a cup on his own and announces to Larry that he is leaving to start his own lemonade stand.  Larry pulls out the agreement and tells Bob that if he sets up shop in the community he will sue him.  Bob is stuck because he does not want to uproot his family and leave the community.  If Bob wants to challenge the agreement he will need to pay a lawyer to do so.  While non-compete litigation is common, it can be avoided.

The best time to deal with a non-compete agreement is before you sign it.  Employers can protect their interests by drafting a non-compete agreement that follows the law. By signing a non-compete an employee is giving up some freedom.  It may be worth it to sign the non-compete – the point is you should understand what you are signing.  You should not allow the joy and confidence that come from having marketable skills cause you to sign something you will regret later.  Otherwise, you may end up stuck in the corner sharing a table with the freedom of your own desk staring you right in the face from across the room.

Jeff Brunson is an attorney and shareholder at Beard St. Clair Gaffney PA.  Jeff is a trial lawyer who specializes in business disputes and estate litigation.  He can be reached at his Rexburg office (208) 359-5883 or jeff@beardstclair.com

Staff at 3:04 PM
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