What is indirect competition?

Until recently, I had worked as a practitioner for the same employer for a period of ten years. Shortly after my original hire date, I did sign a non-compete agreement which prohibited both "direct and indirect competition". I never signed any other type of employment agreement.

To say that I worked in a hostile work environment is an understatement. I was the longest-standing employee at the time of my departure by many years. I witnessed every employee who chose to pursue employment outside of the company be sued when they left. I was underpaid, harassed, and bullied, but wary to leave for a very long time due to my limited financial resources and fear of other repercussions.

Toward the end of my employment, I accepted a position with another company which was in the area of possible violation of my non-compete contract. I did not solicit any business for the new employer, reveal any trade secrets or client lists, or perform any duties during my employment hours by my primary employer. The devices being distributed by each company were very different; however, overlapped with each other in the world of medical billing.

I have since found the courage to leave the original employer, seeking employment in the same field outside of my non-compete area. I decided to keep the position with the second employer. Not surprisingly, the second employer has received a "cease and desist" notice from my original employer calling for immediate termination of my employment.

Fearing the impact of further legal action to the second employer, I have complied and resigned my position. I am anticipating an inevitable lawsuit against me in the near future. What is the definition of indirect competition, and what are my legal options?

3 answers  |  asked Apr 11, 2011 8:33 PM [EST] in Contracts  |  applies to Pennsylvania

Unlock Non-Compete Agreements: Keys to Escape

Answers (3)

Christopher Ezold
Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania or Federal law apply, unless otherwise specified.

That being said, you have a very complicated situation, and potential issues with both 'direct' and 'indirect' competition. There are a large number of facts that are not in your question which an attorney would need to know to give you a thorough answer.

'Indirect' competition does not have a precise definition, but is generally inserted into noncompetition agreements to prevent former employees from using other employees at a new employer as stand-ins; i.e. telling another salesperson at a new employer what clients to approach and how to do it.

Your legal options are largely going to be determined by (a) the facts of your employment and subsequent jobs, and (b) whether you are sued or not. There are many reasons that a noncompetition agreement can be invalid or unenforceable; whether these apply to your situation would be determined by the facts, which I do not yet know.

Attorney Goldner is correct; you should not wait to see if you are sued, but should meet with an employment attorney ASAP to review your issues and how to approach them. If you can head off a lawsuit, you will save yourself an enormous amount of time, money and aggravation.

If you would like to discuss this matter further, please feel free to contact me at the below address(es) or number.

/Christopher E. Ezold/
Chair of the Board,
Magellan Leadership Group

The Ezold Law Firm, P.C.
One Belmont Avenue,
Suite 501
Bala Cynwyd, PA 19004
(610) 660-5585
Cezold@Ezoldlaw.com
www.ezoldlaw.com

posted by Christopher Ezold  |  Apr 12, 2011 08:55 AM [EST]
Scott Leah
There is a lot to your question, and I would have to review your actual non-compete agreement, and discuss in much more detail the nature of the business and the job you did, to answer your questions.

The enforceability of a non-compete involves many factors, including (a) whether it was supported by adequate consideration, (b) whether it is reasonable in its geographic scope, (c) whether it is reasonable in its length of time, (d) whether it is reasonable in its scope, i.e. what it bars you from doing, (e) whether the employer has a legitimate business interest in enforcing the non-compete, (f) whether the new position violations the exact terms of the non-compete, etc.

Give me a call if you would like me to review your non-compete and discuss this further.

posted by Scott Leah  |  Apr 12, 2011 08:51 AM [EST]
Harold Goldner
I have got to ask why you are only getting around to asking lawyers questions NOW, only *after* you have decided (on your own) that the non-compete covenant is enforceable, and (also on your own) to resign your new position.

It's akin to asking a doctor for medical advice once you've already started removing your own appendix.

Get to an employment lawyer *now* and find out what your options are (and perhaps were). It's impossible to answer your questions here without: (1) seeing the non-compete agreement with your former employer and (2) analyzing the entire employment history.

Otherwise, I suggest you have a decent anesthetic when that appendix comes out.

posted by Harold Goldner  |  Apr 11, 2011 9:55 PM [EST]

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