Non-compete clause validity

I work as a H1-B employee for a small to medium sized software consulting firm based out of New York. This company has a contract to provide profesisonal services to another organisation in Rockville, MD which further offers us as software consultants to their clients.

My organisation made me sign a non-compete agreement with the following verbiage before I came to the USA in 1999:
"During the term of this agreement and for a period of 1 year immediately following the termination hereof, the Employee shall not, without the prior consent of the Company, work as an Employee or contractor, either directly or indirectly for any of the Company's clients and any end customer of the Company or its client, to whom the Employee renders the professional services."

Now since I've come to the USA, my company has contracted me out its client in MD. I was laid off with a written letter from my employer in March 2003 without any notice period or compensation thereof. The original contract states that the employer has to provide me with a notice of 15 days or pay thereof.

Two weeks after I was laid off, my employer hired me back to work with the same client in April '03 in a different position without a formal contract at the time. Later in December '03, my employer's HR division sends me another agreement stating the same non-compete clause as mentioned before and I've refused to sign it but I continue to be paid for my services till date.

I have been working with an end client of the firm in MD and have been posted in Ohio for the past 1 year. At a day's notice, I have informed that my term with the end client has ended and I have to return to MD with no confirmation of future assignments. I have an opportunity to continue working with the end client in OH through another software vendor who has been dealing with the end client for over 2 years and is in very good standing with the company. This vendor is known for its fair employment and trade practices in the USA.

So my questions are:
1. Since I have not signed a new contract with my company, does the non-compete clause hold good in any way ?
2. Can I file for damages against my employer since they have in the past broken clauses of their own agreement ?
3. Am I liable for any damages if I do not give my employer the defined notice period when resigning ?

Please advise.

Thank you.

1 answer  |  asked Feb 14, 2004 4:05 PM [EST]  |  applies to Ohio

Unlock Non-Compete Agreements: Keys to Escape

Answers (1)

Ann Lugbill
Non-compete

When you sign a non-compete agreement or other employment contract and several different states are involved, plus your special HB status, it is not possible to answere your questions without review of each of the contracts and your immigration status.

To answer your questions, an attorney must understand exactly what the terms of any written agreements, including the non-compete, and whether the non-compete terms would be considered reasonable in time and scope (of work and geography).

1. Under the law in most states, the courts can "red-pencil" a non-compete agreement and restrict it to reasonable limitations in time and work, so that you are not deprived of you right to earn a living in your chosen field. For example, if your work was highly specialized and proprietary, the court might find that a broad geographic scope was appropriate (Ohio and Maryland and New York), not just where you were employed when you signed the non-compete agreements. However, if might find that a one-year term was not reasonable and that 6 months was reasonable, under all of the circumstances.

Another problem is that without looking at the documents, it is not possible to determine whether any of the prior non-compete agreements remain in effect and which state's laws apply to it and, thus, to you.

2. Assuming you have a valid contract, the laws generally permit you to sue for damages. However, it is probably not worth doing and will likely just cause a countersuit or claim to be filed against you on the non-compete.

3. If the notice period is specified in a contract that you agreed to, you have breached the contract and are liable for damages if sued on that clause. However, a general employer "preference" for 2 weeks' notice does not translate into a formal contractual right to demand 2 weeks' notice.
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As a practical matter, I would suggest that you try to go forward with the new employment you have been offered with the more honorable employer. You should either simultaneously either pay on your own for competent legal advice on this matter in Ohio or determine if the new employer's HR department can refer you to an attorney that they trust to provide the legal advice to you. Non-compete agreements are a special area of the law and you should be careful to be sure that the lawyer you consult with has experience in the area. General employment law experience may not be sufficient.

posted by Ann Lugbill  |  Feb 15, 2004 07:48 AM [EST]

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