On February 3, 2016 the Wall Street Journal had an article titled, “Noncompete Pacts Hobble Rookies.” The prime example was about a young legal industry reporter who changed jobs only to find out her employment agreement had a noncompete clause related to working for another legal reporting firm.
As I work on buy-sell deals noncompete agreements are standard. No buyer wants his seller setting up shop again in the same industry and same area. Attorneys have told me seller noncompete agreements are the easiest to enforce as the seller received substantial payment for the business.
Attorneys have also told me it’s tough to enforce an employee noncompete in Washington as the courts have ruled you can’t prevent someone from earning a living in their area of expertise. However, they say you can prevent someone from soliciting customers and employees for a certain length of time.
According to the WSJ, “Labor experts say courts generally frown on noncompete agreements that aren’t aimed at protecting proprietary information like intellectual property, formulas, trade secrets or business strategies.”
During 2015 there were local stories about how Jimmy Johns had sandwich makers sign an employment agreement preventing them from working for another sandwich shop. A restoration franchise had the same thing for their field workers.
I don’t know why noncompetes are exploding in popularity but here are a few thoughts:
- Too many lawyers involved (in business decisions).
- General paranoia.
- Oversized egos, I mean seriously, restricting what a sandwich maker can do?
Just like in a lot of things, common sense has disappeared.
“If your dog will not come to you after having looked you in the face, you should go home and examine your conscience.” Woodrow Wilson