Is a non-competition breach clause in an equity agreement enforceable as non-competition agreement?

While I worked for a firm based in AL (I live and worked in NC) I signed and hold an equity agreement. One clause listed as possible breeches is considered competiting against them until the end of the agreement period (75-years old). The competition as they deem is somewhat ambiguous and determined at their discretion.

I was terminated as part of a "workforce reduction" and am now looking at directly competing with them.

The crux of my question is if I compete with them and breech the agreement, am I only forfeiting the equity or am I still bound by non-competition in all of their areas of interest?

1 answer  |  asked Oct 28, 2009 06:33 AM [EST]  |  applies to Alabama

Answers (1)

Neil Klingshirn
I am not familiar with Alabama non-compete law. However, general non-compete law would treat a non-competition clause in an equity agreement as valid, as long as the duration and scope of the restriction on your ability to compete were also reasonable in relationship to the former employer's business interest. If Alabama law follows these same lines, then you should consult an Alabama lawyer to see if the duration for the 75 year duration of the agreement is excessive. On its face, it would appear to be.

Update to Answer:

If the non-compete clause is valid, then you the damages that you would be liable for should you breach it would not be limited to your equity under the agreement. Instead, the measure of damages would be tied to the foreseeable loss that your breach caused the former employer. If you have significant equity under the agreement, however, you may have some leverage for negotiating a reduction of the restrictions.

posted by Neil Klingshirn  |  Nov 4, 2009 6:32 PM [EST]

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