I hate non-competes! Not just because of their effect on employees by preventing them from taking the ideal job. I also hate non-competes because of what they do to the American economy.
I believe that innovation comes from interaction—and that for Virginia (and the United States) to thrive as a hub of innovation in a highly competitive world, we must follow Silicon Valley’s model where non-competes are not enforceable and entrepreneurs are free to innovate without fear of litigation.
In my opinion non-competes are still legal in Virginia because of the influence of Big Business on our General Assembly...can you say "campaign contributions"? Big Business has its entrenched connections and lobbyists...employees and workers do not. But Big Business better think about the long-term effects of non-competes...otherwise they may be put out of business by innovative employees in California or India or China or Japan or.........
Friday, May 30, 2008
Wednesday, May 21, 2008
LYNCHBURG NONCOMPETE FIGHT NOT OVER YET!
In February of 2005, Centennial Broadcasting purchased WLNI, Lynchburg's radio talk station, from its owner, Gary Burns. Centennial paid Burns an extra $25,000 for agreeing to not operate a talk radio station in the Roanoke-Lynchburg market for five years. Guess what? Later in 2005 Burns bought a music station (WBLT - 1350 AM) in Bedford County. Afterwards, when Centennial Broadcasting bought a nearby Roanoke station (WLEQ - 106.9 FM) and turned it into an oldies music station, Burns concluded that event changed the market’s needs and he converted WBLT into a sports-talk station.
Centennial filed suit against Burns for violation of the non-compete provision contained in the purchase agreement for WLNI. The U. S. District Court in Lynchburg found Burn's actions to be in violation of the non-compete and that ruling was upheld late last year by a federal appeals court. End of story....right? Wrong!
It appears that Burns brought the matter to the attention of the Federal Communications Commission (FCC) which issued a ruling on May 8 favorable to Burns. The commission found the non-compete agreement violated rules that give broadcasters the right to evaluate their market and select appropriate programming. The FCC levied a $8,000 fine against Centennial (the FCC’s base fine for unauthorized control) and ordered Centennial to petition the U. S. District Court in Lynchburg District to dissolve its previously issued injunction against Burns.
The lesson of the story: Courts may not have the final say when non-competes impact federal regulatory agencies, like the FCC.
Centennial filed suit against Burns for violation of the non-compete provision contained in the purchase agreement for WLNI. The U. S. District Court in Lynchburg found Burn's actions to be in violation of the non-compete and that ruling was upheld late last year by a federal appeals court. End of story....right? Wrong!
It appears that Burns brought the matter to the attention of the Federal Communications Commission (FCC) which issued a ruling on May 8 favorable to Burns. The commission found the non-compete agreement violated rules that give broadcasters the right to evaluate their market and select appropriate programming. The FCC levied a $8,000 fine against Centennial (the FCC’s base fine for unauthorized control) and ordered Centennial to petition the U. S. District Court in Lynchburg District to dissolve its previously issued injunction against Burns.
The lesson of the story: Courts may not have the final say when non-competes impact federal regulatory agencies, like the FCC.
Monday, May 19, 2008
Trade Secrets and Computer Crimes
As our readers know, my law firm will only represent employees in disputes over non-compete and non-solicitation cases. Frankly, we don't believe non-competes and similar restrictions on your right to earn a living should be upheld...in our opinion they are against sound public policy.
We are seeing more and more corporations adding to their lawsuit against former employees allegations of violatons of the Virginia Trade Secret Statue as well as the Virginia Computer Crimes Act. In my opinion most of these allegations are "fluff" and have no merit and now a federal judge in Alexandria, Virginia has given us more support of our position in the court's decision in Othentec Limited v. Jeffrey Phelan, and others (decided May 12, 2008).
The case involved an entrepreneur who started several corporations to market optical imaging technology, including a company later operated by his son-in-law. The entrepreneur and his son-in-law had a "falling out" and the entrepreneur filed suit against the son-in-law alleging, among other things, violations of the Virginia Computer Crimes Act (VCCA)(Va. Code § 18.2-152.3) and the Virginia Uniform Trade Secrets Act(VUTSA)(Va. Code § 59.1-336) in the operation of his business.
In analyzing the case, the court noted the three elements of committing a violation of the VCCA are:(1) using a computer or computer network; (2) without authority; (3) intending to obtain, embezzle, or convert the property of another. The court found no such evidence existed and dismissed the allegation. Likewise, the court noted the VUTSA makes it illegal for a person to misappropriate trade secrets from another. The court found that no evidence had been presented that a "trade secret" had been taken or used and dismissed this portion of the case as well.
This case is instructive to those employers who file "frivolous" allegations that a departing employee has violated either the Trade Secrets Act or the Computer Crimes Act.
A win for the little guy....and Kudos to the court!
We are seeing more and more corporations adding to their lawsuit against former employees allegations of violatons of the Virginia Trade Secret Statue as well as the Virginia Computer Crimes Act. In my opinion most of these allegations are "fluff" and have no merit and now a federal judge in Alexandria, Virginia has given us more support of our position in the court's decision in Othentec Limited v. Jeffrey Phelan, and others (decided May 12, 2008).
The case involved an entrepreneur who started several corporations to market optical imaging technology, including a company later operated by his son-in-law. The entrepreneur and his son-in-law had a "falling out" and the entrepreneur filed suit against the son-in-law alleging, among other things, violations of the Virginia Computer Crimes Act (VCCA)(Va. Code § 18.2-152.3) and the Virginia Uniform Trade Secrets Act(VUTSA)(Va. Code § 59.1-336) in the operation of his business.
In analyzing the case, the court noted the three elements of committing a violation of the VCCA are:(1) using a computer or computer network; (2) without authority; (3) intending to obtain, embezzle, or convert the property of another. The court found no such evidence existed and dismissed the allegation. Likewise, the court noted the VUTSA makes it illegal for a person to misappropriate trade secrets from another. The court found that no evidence had been presented that a "trade secret" had been taken or used and dismissed this portion of the case as well.
This case is instructive to those employers who file "frivolous" allegations that a departing employee has violated either the Trade Secrets Act or the Computer Crimes Act.
A win for the little guy....and Kudos to the court!
Friday, May 16, 2008
The NonCompete Quandary
I want to share with our readers an excellent article from the online edition of Virginia Business and written by Marjolijn Bijlefeld.
The article looks at how several different employees and employers in Virginia have been affected over the years by noncompete agreements. As an employee, reading this article will provide you with two very clear recommendations:
1. Do not sign a noncompete contract without first discussing with a knowledgeable attorney the impact the agreement can have on your and your family's future.
2. If you have already signed the agreement and are contemplating changing jobs to go with a potential competitor of your present employer, better have a chat with that same lawyer!
Read the noncompete article here.
The article looks at how several different employees and employers in Virginia have been affected over the years by noncompete agreements. As an employee, reading this article will provide you with two very clear recommendations:
1. Do not sign a noncompete contract without first discussing with a knowledgeable attorney the impact the agreement can have on your and your family's future.
2. If you have already signed the agreement and are contemplating changing jobs to go with a potential competitor of your present employer, better have a chat with that same lawyer!
Read the noncompete article here.
BE A SMART EMPLOYEE
For my Gen Xers and Gen Yers (you know who you are if you (1) have a facebook page; or (2) myspace profile; (3) a Blog; or (4) a profile on Linked in), LISTEN UP!
Be careful what you post on these websites.
If you are going to leave your company - and have a non compete (even if you are not going to breach the non-compete) be careful what you post.
Don't post info about when you are going to start a company, or quit your job, or what you think about your current employer. They are watching, and looking - and if and when you leave, their lawyers will be watching and looking like crazy!
Hard to argue "I had no intention of starting my own company and serving these old clients" when your linked in profile states "I left my old job to start my new company."
or, hard to say "I didn't ever take proprietary information home or load it onto my home computer" when your blog says - "spent the day at home yesterday, making client calls."
Always be honest, but know, that even exaggerations on the Internet look like TRUTH - and you don't want all of these comments, admissions or statements, coming back to you in court someday!
Be careful what you post on these websites.
If you are going to leave your company - and have a non compete (even if you are not going to breach the non-compete) be careful what you post.
Don't post info about when you are going to start a company, or quit your job, or what you think about your current employer. They are watching, and looking - and if and when you leave, their lawyers will be watching and looking like crazy!
Hard to argue "I had no intention of starting my own company and serving these old clients" when your linked in profile states "I left my old job to start my new company."
or, hard to say "I didn't ever take proprietary information home or load it onto my home computer" when your blog says - "spent the day at home yesterday, making client calls."
Always be honest, but know, that even exaggerations on the Internet look like TRUTH - and you don't want all of these comments, admissions or statements, coming back to you in court someday!
Wednesday, May 14, 2008
WHAT TO DO ABOUT YOUR NON-COMPETE
Hate your current job? Maybe you don't hate it, but you want to leave? Have a non-compete?
Before you call our office and ask us to review your contract, this is what you need to do:
1. REVIEW YOUR CONTRACT - does it say that Virginia law applies? If so, we can help.
2. DON'T TELL ANYBODY - don't tell your friend at work you are thinking of leaving - don't tell anyone at work!
3. DON'T PLAN YOUR NEW BUSINESS, AT WORK - I thought this was obvious, but sadly - I was wrong. When you leave, they will sweep your computer - any emails you sent about your new business, business plans drafted - websites searched, will become your employer's evidence against you in a breach of contract or tortuous interference case.
4. FIND OUT WHAT HAS HAPPENED TO OTHER EMPLOYEES WHO LEFT - do you know there have been 4 folks who left, competed, and were not sued? That's good news - try to quietly find out what has happened to other employees.
5. SAVE MONEY - even if your employer sues you, and the court finds either (1) the contract was invalid or (2) you didn't breach it - you will have to pay a good deal of $ in attorneys fees defending yourself, and unless your contract has an attorneys fee provision in it, you will not likely get repayment for what you have spent.
6. BE ORGANIZED - in Virginia, a Breach of contract claim can be brought in 5 years of the breach - which means, you could be sued for something that happened many years ago. Keep records, emails, contact names etc - any doubt in your mind? Be organized.
HAVE SOMEONE look at the contract. It may be over broad. it may be invalid - it may however, be binding - and if so, we would hate for you to spend time and money defending a lawsuit, only to be told by the Court, you can't compete after all!
Before you call our office and ask us to review your contract, this is what you need to do:
1. REVIEW YOUR CONTRACT - does it say that Virginia law applies? If so, we can help.
2. DON'T TELL ANYBODY - don't tell your friend at work you are thinking of leaving - don't tell anyone at work!
3. DON'T PLAN YOUR NEW BUSINESS, AT WORK - I thought this was obvious, but sadly - I was wrong. When you leave, they will sweep your computer - any emails you sent about your new business, business plans drafted - websites searched, will become your employer's evidence against you in a breach of contract or tortuous interference case.
4. FIND OUT WHAT HAS HAPPENED TO OTHER EMPLOYEES WHO LEFT - do you know there have been 4 folks who left, competed, and were not sued? That's good news - try to quietly find out what has happened to other employees.
5. SAVE MONEY - even if your employer sues you, and the court finds either (1) the contract was invalid or (2) you didn't breach it - you will have to pay a good deal of $ in attorneys fees defending yourself, and unless your contract has an attorneys fee provision in it, you will not likely get repayment for what you have spent.
6. BE ORGANIZED - in Virginia, a Breach of contract claim can be brought in 5 years of the breach - which means, you could be sued for something that happened many years ago. Keep records, emails, contact names etc - any doubt in your mind? Be organized.
HAVE SOMEONE look at the contract. It may be over broad. it may be invalid - it may however, be binding - and if so, we would hate for you to spend time and money defending a lawsuit, only to be told by the Court, you can't compete after all!
WORSE THAN YOU THOUGHT
Please read your employment contract before you sign it.
Please have an attorney look at it with you to explain what it means.
Example 1 - woman wants to leave her job. She notifies her supervisor, who says "We don't want you to leave, and if you do, you owe us $10,000." "WHAT?" She exclaims! Upon review of the contract, it says that if she leaves before her contract is up, she owes them a certain amount of money.
I have seen this in many contracts - from counselors to doctors.
Example 2 - Man works for XYZ corp but is the only employee at XYZ that serves certain industries. He would rather work from home, and says he is going to leave. Employer reminds him that even if XYZ Corp cannot continue to work in that area, he can't either because he signed a non-compete that prohibits him from working anywhere within a 50 mile radius of their office, serving that industry!
We see this type of situation in almost every field (but law) - accountants, car salesman, engineers - you name it
Example 3 - Client calls and explains, "In my industry, there are only 4 clients worldwide. My non-compete says for the next 5 years, I am prohibited from working at another business that serves any of those 4 clients in the way I used to at my old company. What can I do?"
Non-competes are everywhere, they limit your ability to make a living, and truly serve to quash the great American dream of working for yourself. If you want to try to fight yours, or want to know what it means - call our office. We will be happy to help.
Please have an attorney look at it with you to explain what it means.
Example 1 - woman wants to leave her job. She notifies her supervisor, who says "We don't want you to leave, and if you do, you owe us $10,000." "WHAT?" She exclaims! Upon review of the contract, it says that if she leaves before her contract is up, she owes them a certain amount of money.
I have seen this in many contracts - from counselors to doctors.
Example 2 - Man works for XYZ corp but is the only employee at XYZ that serves certain industries. He would rather work from home, and says he is going to leave. Employer reminds him that even if XYZ Corp cannot continue to work in that area, he can't either because he signed a non-compete that prohibits him from working anywhere within a 50 mile radius of their office, serving that industry!
We see this type of situation in almost every field (but law) - accountants, car salesman, engineers - you name it
Example 3 - Client calls and explains, "In my industry, there are only 4 clients worldwide. My non-compete says for the next 5 years, I am prohibited from working at another business that serves any of those 4 clients in the way I used to at my old company. What can I do?"
Non-competes are everywhere, they limit your ability to make a living, and truly serve to quash the great American dream of working for yourself. If you want to try to fight yours, or want to know what it means - call our office. We will be happy to help.
Headhunters and Management Recruiters
If you are unhappy with your current job situation you may have had the opportunity to retain the services of a job recruiter or headhunter. For those employees who have not, a job recruiter or headhunter is an individual or company who attempts to match employees searching for a new job with companies in need of employees. Sometimes these recruiters are paid by the individual looking for a new job and sometimes by the employer looking to fill a need.
Using a job recruiter, headhunter, or placement agency is a great idea! However, be aware of the fact these recruiters are usually not attorneys and cannot provide you advice about employment contracts...especially the validity and enforceability of your current non-compete or non-solicitation agreement with your present employer.
Don't end up paying for the services of a headhunter but then learn that you cannot take your "Dream Job" because of your non-compete agreement.
Using a job recruiter, headhunter, or placement agency is a great idea! However, be aware of the fact these recruiters are usually not attorneys and cannot provide you advice about employment contracts...especially the validity and enforceability of your current non-compete or non-solicitation agreement with your present employer.
Don't end up paying for the services of a headhunter but then learn that you cannot take your "Dream Job" because of your non-compete agreement.
Thursday, May 8, 2008
Non-Competes: They Are Everywhere!
I try to get regular exercise, primarily running, biking, and lifting weights. My local athletic club is about 10 minutes from my office and 5 minutes from my house...so I really don't have a good excuse not to work out!
During my last trip to my athletic club I ended up talking with a young college graduate who is working for the club as a personnel trainer. I was shocked to learn the trainer was required to sign a non-compete agreement before being employed by my club. The non-compete prevents the employee from working as a personal trainer within 50 miles of my city for a period of one year after leaving the current position.
I seriously doubt the agreement is enforceable. Why does an athletic club need to prevent a personal trainer from working in the surrounding area? Certainly not to protect a legitimate business interest. I can see if the club wants the employee to agree not to open a competing athletic club within 50 miles for one year...but not to limit their job opportunities in their chosen profession.
Caveat Number 1: Read the employment agreement before signing!
Caveat Number 2: Just because your employer tells you the employment agreement prevents you from working where you want doesn't make it true!
During my last trip to my athletic club I ended up talking with a young college graduate who is working for the club as a personnel trainer. I was shocked to learn the trainer was required to sign a non-compete agreement before being employed by my club. The non-compete prevents the employee from working as a personal trainer within 50 miles of my city for a period of one year after leaving the current position.
I seriously doubt the agreement is enforceable. Why does an athletic club need to prevent a personal trainer from working in the surrounding area? Certainly not to protect a legitimate business interest. I can see if the club wants the employee to agree not to open a competing athletic club within 50 miles for one year...but not to limit their job opportunities in their chosen profession.
Caveat Number 1: Read the employment agreement before signing!
Caveat Number 2: Just because your employer tells you the employment agreement prevents you from working where you want doesn't make it true!
Thursday, May 1, 2008
CASE REPORT: FEDERAL COURT IN ALEXANDRIA SIDES WITH EMPLOYEE
On April 15, 2008 Judge Gerald Bruce Lee issued an opinion favorable to the "little guy" in a dispute over the validity of a non-compete clause. The case is Nortec Communications v. Carl Lee-Llacer (USDC, Eastern District of Virginia).
Among other issues, the court was faced the legality and enforceability of a non-compete clause which provided:
Non-Competition. The Employee agrees that he or she shall not, for a period of twelve (12) months after the termination of the employment relationship for any reason:
(a) become employed by or perform services for any existing customer or client of the Company for whom Employee has performed services while employed by the Company-other than on behalf of the Company-if such employment or services relates to the products or services offered by the Company;
(b) directly or indirectly . . . engage in a business in direct competition with the Company within the State of Maryland, Commonwealth of Virginia or the District of Columbia.
Judge Lee found the non-compete unenforceable under Virginia law. Judge Lee held that in situations involving employment with a direct competitor, non-compete clauses which restrict the former employee's performance of functions for his new employer are upheld only to the extent that the proscribed functions are the same functions as were performed for the former employer. In other words, the non-compete clause can only limit the employee from performing the same "functions" he/she performed for the previous employer.
Good news for the "little guy."
Among other issues, the court was faced the legality and enforceability of a non-compete clause which provided:
Non-Competition. The Employee agrees that he or she shall not, for a period of twelve (12) months after the termination of the employment relationship for any reason:
(a) become employed by or perform services for any existing customer or client of the Company for whom Employee has performed services while employed by the Company-other than on behalf of the Company-if such employment or services relates to the products or services offered by the Company;
(b) directly or indirectly . . . engage in a business in direct competition with the Company within the State of Maryland, Commonwealth of Virginia or the District of Columbia.
Judge Lee found the non-compete unenforceable under Virginia law. Judge Lee held that in situations involving employment with a direct competitor, non-compete clauses which restrict the former employee's performance of functions for his new employer are upheld only to the extent that the proscribed functions are the same functions as were performed for the former employer. In other words, the non-compete clause can only limit the employee from performing the same "functions" he/she performed for the previous employer.
Good news for the "little guy."
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