THE JANITOR TEST

We see very broad non-compete agreements that prohibit:

"working directly or indirectly for, any competitor (listed in Appendix A) for a period of 2 years, after termination of employment with XYZ Widget Company."

Does this contract prevent you from using your current skill set, and knowledge base, for a competitor? YES. But it also prevents you from sweeping floors at the competitor's business, and many Virginia Courts have found this to be overly broad and an unreasonable restriction on your right to employment.

Let's call it the Janitor test. If the agreement limits you from ALL employment with another competitor, it could likely be held to be overly broad and thus unenforceable... but, if it prohibits you or limits you rather, to using your skills used at XYZ, then the court is more likely to find it is reasonable...

THE FIVE COMMANDS FOR NEGOTIATING NON-COMPETE CONTRACTS

Lauren and I spend a great deal of time helping employees get out from under those horrible and unfair non-compete contracts. The battle can be won but it is fight and it can be expensive. Infrequently, we get the opportunity to consult with a client BEFORE he or she signs a non-compete. In this short article we outline for our readers our tips for negotiating with your employer when you are asked to sign a non-compete:

1. Limit the Geography: Employers want the agreement to be as broad as possible. Try to limit the geographical area to something reasonable…something you can live with (and earn a living) if your employment ends.

2. Limit the Time Span: Just like geography, employers would like to keep you from competing with them forever. Most courts, depending on the circumstances, look at restrictions of more than 2 years as oppressive. If you work in the computer industry or information technology, then 6 months may be more reasonable as the pace of change with these industries is much greater than with retail sales.

3. Suggest Other Restrictions: Offer to sign a “non-disclosure” or “non-solicitation” contract as opposed to a non-compete agreement. A non-solicitation agreement would prevent you from going after your employer’s current customers or clients. A non-disclosure agreement would prevent you from taking price lists, client lists, and other proprietary information with you when you leave your employer. Both of these agreements afford your employer some protection without taking away all of your future job prospects.

4. Make Money for Not Working: Tell you employer that you should be paid if you agree to be “locked up” and prevented from working for an agreed period of time and within an agreed upon geographical area. If you are highly sought after for your skills and knowledge, suggest to your employer that you should receive 50% of your salary for the time of the non-compete.

5. Find an Attorney: This should probably come first. Talk to someone knowledgeable about employment law and non-compete clauses. Each state has different laws and each industry is looked up differently by the courts. Spend some money up front!

BANK EMPLOYEES AND NON-COMPETE AGREEMENTS

There is an interesting process going on in the banking industry. The big banks (Wachovia, Bank of America, Suntrust, Wells Fargo, JP Morgan Chase, Citibank, etc.) keep getting bigger and bigger! They don’t appear interested in small towns or small businesses. Enter the old-timey, small, community bank. In my area those banks go by the name Valley Bank, Hometown Bank, National Bank of Blacksburg, MainStreet Bank, etc. The growth of small community banks is not what interests me…it’s what these start-up banks are doing to hire competent and experienced employees that interests me.

When a small bank wants to enter a new market – it typically opens a loan production office to start building business. The fastest way to get such an office up and running is to hire an experienced banker who has existing relationships with local businesses. Commercial borrowers tend to have much closer relationships with their loan officers than mortgage borrowers, and are much more likely to follow a banker to a new financial institution.

What do the big banks do to fight the loss of employees with commercial lending experience? Make those employees sign a non-compete agreement preventing them from working with another bank in the surrounding area for 1 to 2 years! If you work with one of those big banks…you better think twice before signing a non-compete agreement as you may be seriously limiting your future options. If you have already signed a non-compete agreement and are contemplating moving to a new start-up or community bank….you better speak with an attorney experienced in fighting non-compete contracts.

CASE BY CASE BASIS

Friends.... those in retail / sales / medicine - I wish we could post a formula for how Virginia Courts decide whether your non-compete agreement is valid. But I can't.

One Mile has been considered too broad in geographic scope, 100 miles has been held to be reasonable restriction. Seven years has been held to be reasonable time restriction, 2 years has been held to be too long.. ALL IN VIRGINIA COURTS.

They will look at your exact agreement, in light of your industry, and your employer's actual business - and then decide.

We cannot ever state with confidence, that your agreement is or is not enforceable. Some employers are willing to test the Court - others are not.

We will however, review your contract, advise you in light of Va. Law, and go from there...

PLEASE READ BEFORE YOU SIGN

I am delighted - received a few calls this week, from men and women who want our office to review their contract before they sign it. We are always glad to do this - because knowledge is power in contracts.

The contract may restrict your future employment elsewhere - is it worth it? Can you negotiate
? Want to refuse to sign the Non-compete?

It is much easier to negotiate before you start work, than when you already have 1 foot out the door. Moral of this story, please review your contract before you sign it...

The worst that could happen is you don't get the job