Example of Non-Compete Agreements
Notice the before and after on this settlement agreement. My client, an independent contractor Information Technologist (he wasn’t an employee to begin with) performed some work for a major Fortune 500 company. A dispute arose between the parties which settled for an undisclosed sum of money. The company manager he reported to insisted that the settlement agreement forbid him from seeking future employment with the company. This provision was totally unworkable. It would have been very embarrassing for the client to have to inform every recruiter in the IT field that due to a separation agreement provision, he was prohibited from applying for work at this large conglomerate. Moreover, after his contract ended, my client already had future contracts in the works with other offices across the country with the same company. He couldn’t very well tell another company branch in Florida, for example, that he had to cancel his contract with them because of a settlement agreement he had on the east coast.
When the company agreed to drop that provision, to save face, it added the language that it had no obligation to re employ or transact business with him in the future and that the company could direct its personnel not to rehire or contract with him in the future. That provision was agreeable to both parties. First, the company could enact such provision without this settlement agreement. Second, the likelihood that one manager who had a personal conflict with my client could jeopardize future profits for an entire conglomerate was simply not going to happen. In today’s fluid economy, fewer and fewer employees stay with the same company for their entire careers. Employees now leave companies, work as independent contractors, start their own companies and may even return to a company they left a number of years ago. Legal documents in the twenty first century have to be drafted with that modern reality.
This is a good example of a Non-Compete clause that works well for employers. Most employees fail to study their separation agreements in great detail. In this case, however, the employee retained my office to review his contract and negotiate a clause that allowed the employee to leave with a certain amount of business through clients he generated. Had the employee failed to do that, he would have given up a substantial amount of future business.
Non-Compete agreements have to be reasonable in geographic scope, length of time and reflect the nature of the business of the employer and employee. The lawyer drafting these provisions has to possess an appreciation for the employer’s business to determine the reasonable scope the courts will uphold.