Non-compete invoked by one subcontractor against another

When the employer threatens to enforce non-compete

My standard advise to an employee presented with an employment contract with a non-compete clause is don't sign it. You are buying yourself a lawsuit. You'd probably win the lawsuit, but you'd probably lose a job in the meantime, and incur some very large legal fees.

Courts in New York State are very reluctant to enforce non-compete clauses in employment agreements because they impede the ability of employees to make a living and advance in their choosen fields. Non-competes impede the competive market for qualified employees. (The courts, however, seem to have little reluctance in enforcing non-compete clause in agreements for the sale of a business.) However, all of this does not prevent employers from including non-competes in employment agreements.

Non-compete clauses seem very common these days in the IT area and in the medical area. They seem to become common in areas where employers have a hard time recruiting and retaining employees. Employer will include non-compete clauses in their employment agreements even though they know they have little chance of getting a court to enforce them.

You always have the option of ignoring the clause and going to work for a new employer. However, you and your new employer might get a letter from an attorney representing your old employer, threatening to sue both you and your new employer. The new employer not uncommonly responds to the letter by firing you, saying that it doesn't want to get dragged into a lawsuit. If the new employer does not fire you, then the old employer might actually bring suit against both you and your new employer to enforce the non-compete clause. The likelihood is that you will win this lawsuit, but not after spending a lot of money.

Do you see how the non-compete clause works? The very threat of a lawsuit may make you unemployable in the field you are most qualified for. Unless you decide to change careers, the clause in effect causes you to be suck with your old employer, and, because no one else will hire you, your old employer dictates all of the [very unfavorable] terms.

To preempt the employer, you could bring a declaratory judgment action and seek a preliminary injunction against your old employer. You have a good shot of winning, although I do have to say that courts are reluctant to issue preliminary injunctions. The downside of this preemptive stratgey is that it will still cost you a lot in legal fees.

When you enter into a non-compete clause you are putting yourself between a rock and a hard place. Any way you go, it is going to cost you a lot of money.

If you want out from under the non-compete, you have no choice but to fight.

I suggest you give me a call to discuss you case in more detail.

posted by David M. Lira  |  Apr 30, 2002 6:05 PM [EST]