Non-Compete, Contract Employment

I work as an IT contractor, and recently my contract was nearing expiration. The client for whom I worked (a federal agency) re-evaluated its needs and set out a new, similar statement of work as my old statement of work for competitive re-bid.

I was approached by several contracting firms when the new contract was open for competitive re-bid, and I agreed to work for at least one, should they be the "lowest bidder" on this contract. A company other than my previous company won the contract, and my previous company has chosen to threaten me with a non-compete lawsuit.

While I did sign a Covenant Not to Compete in my employment agreement with my previous company, the wording of the agreement was very specific:
"During the term of this Agreement, and for one year following the term of this Agreement, Employee agrees to not solicit or accept employment from any organization or person introduced to the Employee through [Company Name]."

As I was solicited by a company other than any introduced to me through my previous employer, I do not believe I am in violation of my Covenant Not to Compete. Is my assumption incorrect in this case?

2 answers  |  asked Jul 9, 2004 07:42 AM [EST]  |  applies to Pennsylvania

Answers (2)

Non-Enforcement of a Non-Compete

Initially, you state that you "work as an IT contractor." Do you mean that you work for an IT contractor as an employee? If you are not an employee, then the Agreement does not apply. Determine if you are an employee. Are tax withholdings taken from your pay? Are you paid by the hour, set salary or by the job? Who sets your work hours - you or the company? Who provides your tools / supplies - you or the company? Does the company issue you a 1099 independent contractor tax form?

If you are an employee, Pa. law strictly construes Agreements that limit a persons ability to work. Unless your former employer can show that you will cause great harm unless prevented from working at your new lob, the Court will likely not enforce the Agreement.

However, to properly advise you I would need to see the Agreement and have additional facts.

Please feel free to contact me if you need additional information.

David L. Bargeron, Esquire

posted by DAVID L. BARGERON  |  Jul 9, 2004 12:45 PM [EST]
Christopher Ezold
Your assumption may be correct

Before I respond to your question, I must state that we have not met, you have not retained me, that I have not reviewed your documents or the facts surrounding your question. Therefore, my answer is for informational purposes only, and you should retain an attorney to advise you on your rights and obligations relating to this issue.

That being said, there is a good chance that your non-compete is not effective against prospective employers whom you were acquainted with prior to your previous employer. First, the agreement will likely be construed strictly against the employer; as it clearly states that you are only forbidden to work for entities "introduced to [you] through" your former employer, the words themselves should protect you.

Second, the agreement is only enforcible to protect your previous employer's legitimate business interests. Protecting the relationships it has built with its customers or contractors is a legitimate business interest; however, precluding you from using relationships you built prior to employment is not a legitimate business interest.

However, as I have not reviewed the agreement, I cannot give you a thorough opinion. Feel free to call me to discuss this issue further.

/Christopher E. Ezold/
Nancy O'Mara Ezold, P.C.
401 City Line Avenue,
Suite 904
Bala Cynwyd, PA 19004
(610) 660-5585

posted by Christopher Ezold  |  Jul 9, 2004 09:10 AM [EST]

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