NON-COMPETES AND THE FRANCHISE AGREEMENT

Franchises are everywhere…from McDonald’s to Bed, Bath &Beyond! Most of the agreements which govern these franchises have non-compete provisions. Most franchise agreements have two types of non-compete provisions. First, the “in-term” restriction applies to the parties during the life of the franchise agreement. Secondly, the “post-term” restriction applies to what the parties can and cannot do after the franchise agreement has ended.

Seems to me that both types of these restrictions should be governed by the same set of laws. In Virginia that means the restriction is: (a) reasonable from the standpoint of the employer/franchisor; (b) not an unreasonable restriction on the ability of the employee/franchisee to earn a living; and (c) not contrary to good public policy. A Georgia court agreed and the International Franchise Association (IFA), which represents franchisors not franchisees is upset.

The IFA filed a legal brief in the appeal of the Georgia court’s decision in Atlanta Bread Company International asking that the “in-term” and “post-term” restrictions be treated differently and to allow greater and harsher restrictions for the “in-term” non-competes. Read the IFA’s memorandum in Atlanta Bread International.

Sounds like Hogwash to me!

RIGHT TO WORK STATE

What do you think when you hear the phrase "right to work" state? Well, I used to think it meant Virginians have protected rights at the work place, and that worker's rights come first.

Ha. I was wrong.

The phrase is actually related to unions - that they can't fire you because you join, or belong to a union... but the term has taken on many meanings since the code was adopted to protect members or nonmembers of unions.

Virginia in fact, has very little regulation regarding rights of workers. You cannot fire someone in Virginia because of their gender, age (sometimes), race or religion... (That is also federal law), but you can fire them for sexual orientation, because you don't like the car they drive, or because you feel like it. While many counties have specific laws regarding employment discrimination, most do not, which means under state law, you don't actually have to have a reason to fire someone, and poor job performance is not required either.

Why does this relate to non-competes? Well, because many employees will sign an agreement, and then after the fact, realize it may effect their right or ability to work in the future. Then they might lose their job, and feel like they are really in trouble - fired, no recourse, and then contractually bound not to do anything else.

SO - if presented with a non-compete, have an attorney look at it before hand. There may (or may not) be room to negotiate. Better to negotiate when you are a prized future employee, than someone who has been asked to leave.

VENTURE CAPITAL FIRM TO STOP USING NON-COMPETE AGREEMENTS

Boston venture firm Spark Capital has announced that it is no longer requiring the start-up companies it invests in to require employees to sign non-compete agreements. The firm has stopped requiring non-compete clauses because they are “a significant barrier to start-ups and innovation.” BRAVO!

Non-compete agreements deter innovation and entrepreneurial growth. The ability for workers to hop from job to job has contributed to technology sharing and innovation, and fuels growth.

Non-compete clauses are unenforceable in California’s Silicon Valley. In fact, when the start-up social networking site Facebook left Cambridge for Palo Alto, they cited New England’s non-compete clauses as a major reason for the relocation.

Take heed Virginia!