Will the non-compete clause be enforceable in my situation?

Four years ago, I signed an employment contract with a non-compete clause with Company A. Company A is mainly in the business of training and contracting trained consultants out to larger consulting firms with direct relationships with large corporations. In other words, they sub-contract consultants. The training provided by Company A can be attained at colleges or technical schools but Company A claims that it is proprietary in the employment contract.

Three years ago, I was placed by Company A through Company B as a sub-contractor in Company C. FYI, company B is a preferred vendor of company C. I have been working for Company C for the past three years. But for the past two years, I was the only person from Company A working at Company C.

About a month, I was informed by Company B that Company C has made changes in their sub-contracting policies limiting Company B to sub-contract from a list of companies that is defined by Company B. Now, Company B decided not to include Company A in that list. Hence, I stand to lose my job with Company C which I have received an extension to continue work with them until the end of the year. As Company C has a list of preferred vendors, I approached Company A with this list urging them to contact these companies in order to sub-contract me through them to enable me to continue working at Company C. Also, I informed Company A that they had a deadline of 1/1/2011 to make this happen.

For the longest time, Company A did not express any urgency to help me secure the continuation of my job. Out of panic, I stepped in to put Company A in contact with Company D (preferred vendor of company C) which was willing to help me but Company D was not approved to work with company A. While Company D was working to get Company A approved, I received an offer to join Company E (preferred vendor of company C). On 12/31/2010, Company A was still not approved to work with Company D. Since I was afraid to lose my position at Company C, I decided to join Company E.

Now, Company E has worked with Company A in the past but I am not sure if they are currently in business together. Company E has a relationship with Company C but Company A does not.

With this said, here are my questions.
1. Since Company A does not compete with Company E because Company is a sub-contractor while Company E is a contractor but the non-solicitation and non-compete clauses states that I am not to work for Company A’s customers, would the clause be enforceable?
2. Can an employment contract not have an end date? Is it legal?
3. If the non-compete clause requires me to wait two years before being able to work for the clients of Company A, would the court deem this reasonable?
4. If I am required to pay 30% of my annualized wages but no less than $25,000 on the first day I start my job with my new employer, would the court deem this reasonable?
5. Base on the situation I described, what are my options?

1 answer  |  asked Jan 9, 2011 12:58 AM [EST]  |  applies to Arizona

Answers (1)

Francis Fanning
My first thought about your dilemma is that it is too complex to answer in this forum. You may have an argument that company C was not a client of company A, since A's client was B. Once B ended its relationship with A, A no longer had a protectible interest in having its employees placed by B with anyone. Also, whatever interest A had in protecting a relationship with C was also gone, since C looks to B for employees and B won't use A as a source. Also, it appears that A couldn't establish a link to C by going through D. However, non-compete agreements generally cover an entire industry, not just established business relationships between companies.

Since you have already gone with E, your question is academic. If A does nothing, you have no concern. If A threatens you with a lawsuit, it may also threaten C and E, and that threat may cost you your job regardless of whether the contract is enforceable. If A takes any action at all, you need to immediately consult an experienced employment attorney to have him or her review the agreement and the circumstances. A court might find the agreement unenforceable because two years is too long a time limit, or because A didn't have an interest to protect, or because you didn't violate the contract as written. In any event, if you need legal advice on this issue, you can't depend on simple, one paragraph answers from a forum like this one, any more than you could go on line to find out if you have lung cancer.

posted by Francis Fanning  |  Jan 9, 2011 3:29 PM [EST]

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