SPORTS TALK SHOW HOST FILES SUIT OVER NONCOMPETE CONTRACT

This report comes to us from Texas but the dispute could arise in Virginia or any other state. A Houston radio talk show host has filed suit against the parent company which owns his station, claiming the station has violated his contract.

The talk show host has asked a Harris County state district court to declare the contract invalid and to prevent CBS Radio from enforcing a non-compete clause that would prevent him from working on air for another station for six months after leaving his current employment (KILT Sports Radio).

At this point we are uncertain of the talk show host’s legal argument but anticipate he will assert that the non-compete provision is overly broad and unenforceable. We will try to follow the developments as this case progress.

Read the Houston Chronicle’s article here.

NON-COMPETES HELP COMPANIES KEEP SECRETS

Eight months after Intarome Fragrance & Flavor Corp. terminated a sales executive, the company smelled something funny. The New Jersey fragrance maker received an e-mail that showed the sales executive was soliciting business from a key Intarome customer, according to court papers.

Intarome sued its former employee, accusing him of breaking an agreement not to compete with the company in the U.S. for a year if he ever left his job. And the suit also accused the ex-employee -- who denies the allegations -- of trying to sell "duplicate" Intarome products in violation of his agreement not to divulge confidential information.

Read more about this all too common litigation.

BETTER CHECK YOUR EMPLOYMENT AGREEMENT BEFORE BEGINNING A JOB SEARCH

Americans rarely work for the same employer during their entire work life. Most change jobs and employers multiple times during a career. The changes in employment are the result of the mobile nature of our society and better, and more financially rewarding, employment opportunities.

However, before you start sending out your resume, your first step should be to review any documents you signed with your current employer for restrictions on future employment, such as a non-compete agreement. Consider the following examples of lawsuits recently filed in Illinois: a doctor who tried to open his own office a few miles away from his old employer's practice; a franchisee that began leasing products from his former boss' competitor shortly after terminating his franchise agreement; or the salesman who thought that he could solicit his old customers at his new job. In each of these cases, the court ordered the parties had to stop working at their new jobs, based on non-compete agreements they had signed with their former employers.

If you are considering changing jobs and you are concerned over documents that you signed with your current employer, then consult with an attorney before you make your move.

RESTRAINT ON TRADE NOT ENFORCEABLE

The Virginia Supreme Court in Motion Control Systems, Inc. v. East (2001) found a covenant not to compete unenforceable. In that case, the company was in the business of designing and manufacturing drive systems for motors. Mr. East, a Motion Control employee, began work as a technician in 1991. In 1997, East signed an agreement that said he could not work in any "business similar to the type of business conducted by the Company, which currently includes any business that designs, manufactures, sells or distributes motors, motor drives, or motor controls."

East resigned his job with the company and was hired by a company that produces brushless motors. Motion Control was concerned that the new employer had hired East to get his knowledge and then expand their business into the type of motor that Motion Control currently manufactured. Motion Control filed a lawsuit.

The Virginia Supreme Court found the restrictive covenant unenforceable because Motion Control had "imposed additional restraints which are far greater than reasonably necessary to protect" Motion Control's legitimate business interests. The Court held that the restricted activities could include a wide range of enterprises that are unrelated to the business actually being protected. For example, Motion Control sold a specialized type of brushless motor, the non-compete provision unreasonably restricted the employee's employment with enterprises that sell any motor whatsoever.

VIRGINIA COURTS WILL NOT ENFORCE UNFAIR NONCOMPETITION CLAUSES

As we have discussed, courts will not enforce non-compete contracts that are more restrictive on the employee than is necessary to protect the employer’s legitimate business interests.

The Virginia Supreme Court was faced with this vary issue in the case Simmons v. Miller in 2001. In this case, the company/employer imported a specific brand of cigars and sold them on the East Coast of the United States. However, under the terms of the employee's non-compete agreement, the restriction prohibited the employee from working in "any business similar to the type of business" conducted by the company for three years.

The Virginia Supreme Court held that the restricted functions and lack of any geographical limitation were greater than necessary to protect the legitimate business interests of the company. The non-compete prohibited the employee from being an employee of any company that sold cigars anywhere in the world, while the employee and company were only responsible for selling one type of cigars on the East Coast of the United States. The court found the agreement to be unenforceable.

COVENANTS NOT TO COMPETE: A GENERAL OVERVIEW

Covenants not to compete became commonplace in the 80’s as a result of companies aggressively stealing competitors’ employees. Under the guise of self-protection, a company would make its employees agree that, in return for employment or a bonus, they would not compete against their current employer for a set period of time in a set geographical area.

Courts will refuse to enforce non-compete agreements if they violate public policy by being overly restrictive of the employee’s right to work. The courts ask three basic questions in determining whether non-compete agreements are valid:

· Is the restraint no greater than necessary to protect the employer’s legitimate business interest?
· Does the restraint unfairly restrict the former employee in his/her ability to earn a living?
· Is the restraint reasonable from the standpoint of public policy?


With this background, we will start discussing how courts (primarily Virginia courts) have applied this analysis to disputes involving non-compete agreements.

IMPORTANT INFORMATION FOR SOON TO BE COLLEGE GRADUATES

I remember my first job interview out of law school - I had already decided in my mind, the bottom line salary I would accept, hours etc. The offer, much less than I had hoped, but I was too nervous to negotiate. For those soon to be college graduates, accepting your first job - do not let this happen to you, especially when it comes to a contract.

Take your time - hire an attorney to review the document. Don't trust that the language means what they say it means. Have you waived your rights to your own creative work product and sold it to the company? Have you agreed that all the clients you bring in are now their clients? Have you agreed you won't leave and work at another bank / dealership / company with the same type of services in the next three years?

Not only is it important to read the fine print, but hire a professional to represent you... if they really want you as an employee, they will engage in negotiations of the contract. If they don't, well, you will find that out sooner rather than later!