Will my non-compete hold up if the business is sold and my position eliminated?
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Will my non-compete hold up if the business is sold and my position eliminated?
I was hired about a year ago as VP of Ops for a wholesale company. Customers are nationwide. I signed a non compete that says I cannot work for a company in our product category for 5 years. No geographic limits. We do not have an extremely unique product or process as evidenced by many competitors. The company is being sold and my position eliminated. I am discussing employment with a company in another state that is in the same general industry. Will the non-compete hold up?
Asked on August 28, 2012 under Employment Labor Law, Florida
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
For a definitive answer, you need to bring a copy of the noncompete to an employment law attorney to review with you--this is a contract, and like any contract, it's specific terms are critical to understanding that. That said, some general principals:
1) Courts can "blue pencil," or modify, agreements which are excessive in length or scope. They will not invalidate the agreements entirely, but will reduce them to reasonable and enforceable levels. A five-year exclusion is almost certainly far too long--typically, unless you were the owner and signed the non-compete as part of the sale of the business, the longest you'd be bound for under a non-compete is one year. But you can still be bound for one year.
2) Whether geographic limits or not are required depends on the business and its market--do they have geographic limits? For example: a realtor's non-compete would need to have geographic limits, since realtors' markets are themselves limited, but a non-compete for an Amazon.com exec would not be limited, since the company's market is not limited, either.
3) It does not matter whether the product and processes are unique or not--the non-compete is a contract, and if you signed it, it is enforceable.
4) Usually, IF you are terminated or laid off, the non-compete will not be enforceable due to a failure of consideration (the consideration for the agreement was your employment). But that is not universally true, and you need an attorney to evaluate the agreement and the circumstances.
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