Non-Compete Question, 1099 employee, multiple states involved etc

[manifestdestiny]

Thank you in advance for viewing this.

I was forced to sign a non-compete several months into employment from Company 1 in Ohio. Non-Compete is for all states and for one year (sales is nationwide via any remote location). Obviously, I could not refuse to sign or would be terminated. So I signed, and worked for them for 5+ years. The employment position was sales. Several months ago I left that company (due to Company A never raising employees commission, never giving bonuses, and never offering raises despite making $1m profit + off of me) to work for Company B in a completely different field. After several months, just as I was realizing I was vastly oversold on the earning potential, Company C reached out to me and presented an offer with a ridiculously high commission percentage that I would be crazy to pass up- except for non-compete concerns.

By the way, I am now in Florida and non-compete was signed in Ohio, if it matters. I have 9 months left of it.

Company C and Company A are in the same industry, both sales. The position is virtually the same. However, I would be a 1099 contract employee in Company C. I would NOT go after my previous customers in my new position, there are no trade secrets, and there would be no more competition for my old employer than millions of lottery ticket purchasers are competition for each other- the odds are the same and there is plenty of business to go around. The industry is so vast that "competition" from me (or hundreds of "me's") would be an unrecognizable change for my previous employer.

So, having explained that I was hoping to get clarification on a few questions (non-legally binding of course).

1. If I am a 1099 contract employee working from home, would my new "employer" Company C be subject to legal repercussions if Company A decided to issue a restraining order/cease and desist? Or would it only apply to me directly due to 1099 status?

2. As described above, being back in this sales role is no real competition, threat or damage invoking issue for old company. Would they have a legal leg to stand on if they tried to push the non-compete in court?

3. If worse comes to worse and I have no other recourse, would a move to California (where non-competes are generally voided) dissolve the issue? I know this sounds crazy to some, but I am a single guy and am able to put belongings in storage, literally move to CA for the next year and wait it out. The offered commission percentage is that much of a difference maker.

I really appreciate the help in advance.

Thank you.

 

[justalayman]

Company C and Company A are in the same industry, both sales. The position is virtually the same. However, I would be a 1099 contract employee in Company C. I would NOT go after my previous customers in my new position, there are no trade secrets, and there would be no more competition for my old employer than millions of lottery ticket purchasers are competition for each other- the odds are the same and there is plenty of business to go around. The industry is so vast that "competition" from me (or hundreds of "me's") would be an unrecognizable change for my previous employer.

then why would your former employer even bother with the hassle of creating and instituting a non-compete and possibly seeking enforcement of it should it be violated. While you dismiss the issue quite easily, I suspect your former employer wouldn't be so blase in the expression of their reasons for a non-compete.

1. If I am a 1099 contract employee working from home, would my new "employer" Company C be subject to legal repercussions if Company A decided to issue a restraining order/cease and desist? Or would it only apply to me directly due to 1099 status?

your employer is not a party to the agreement and as such, not restrained by the terms of your agreement and subsequently, not liable to your former company for your possible violation of your agreement.

2. As described above, being back in this sales role is no real competition, threat or damage invoking issue for old company. Would they have a legal leg to stand on if they tried to push the non-compete in court?

that is something you will have to hire an attorney to advise you on. Non-competes are issues that are very specific to the locality involved and the specific terms of the agreement.

3. If worse comes to worse and I have no other recourse, would a move to California (where non-competes are generally voided) dissolve the issue? I know this sounds crazy to some, but I am a single guy and am able to put belongings in storage, literally move to CA for the next year and wait it out. The offered commission percentage is that much of a difference maker.

since the issue apparently started in state other than CA, the laws of that state would be the laws applicable to your situation. Hiding behind California's laws to attempt to elude actions on a contract originating in Ohio while you were not a resident of California is not going to be a successful activity.

 

[swalsh411]

My educated opinion is that a non-compete which covers the entire country from sea to shining sea is far too broad in scope in terms of geography to be enforceable. Unless you are stealing customers or trade secrets I wouldn't worry about it. Non-competes are not supposed to prevent you from making a living in your field.

 

[manifestdestiny]

then why would your former employer even bother with the hassle of creating and instituting a non-compete and possibly seeking enforcement of it should it be violated. While you dismiss the issue quite easily, I suspect your former employer wouldn't be so blase in the expression of their reasons for a non-compete.

your employer is not a party to the agreement and as such, not restrained by the terms of your agreement and subsequently, not liable to your former company for your possible violation of your agreement.
that is something you will have to hire an attorney to advise you on. Non-competes are issues that are very specific to the locality involved and the specific terms of the agreement.

since the issue apparently started in state other than CA, the laws of that state would be the laws applicable to your situation. Hiding behind California's laws to attempt to elude actions on a contract originating in Ohio while you were not a resident of California is not going to be a successful activity.

I agree, my former employer certainly is not blase about enforcing the non-competes. In my opinion, it isnt about the supposed competition on the open market, it is to protect them from former employees taking their customers with them- and that's it. Which is one of the reasons I wouldn't even think about that end. I am good at what I do- I can wrangle up a new customer base. I know they have gone after ex-employees that have violated the non-compete by contacting/taking customers with them, however I am not aware of them going after anyone that has left their customer base behind but stayed within the industry.

So, the new employer, since I would be a 1099, would not be subject to lawsuit, cease and desist letters, etc? It is only me that would have to deal with it? Just want to know what to expect.

I'm not sure about your take on CA though. From what I can find, CA courts refuse to take up non-compete cases. I would move and establish residence in CA immediately if need be. I dont think the originating state is the enforcer- I think it is the state in which the employment is conducted. Admittedly, I am looking for clarification on this particular issue. I may have to contact not only a FL attorney, but a CA attorney as well to cover my bases. I just want to know as much as possible/have as much advice as possible before I wade into those waters. Thank you for your insights and opinions, I appreciate it.

 

[manifestdestiny]

My educated opinion is that a non-compete which covers the entire country from sea to shining sea is far too broad in scope in terms of geography to be enforceable. Unless you are stealing customers or trade secrets I wouldn't worry about it. Non-competes are not supposed to prevent you from making a living in your field.

I am also under the impression that a non-compete in too broad of scope is difficult to enforce. I guess that geographical broad scope is determined by the courts? I definitely would not bring any of my customers, nor are there any trade secrets involved- everyone with years of experience in my line of work will know virtually the same thing about the industry.

The one issue with the broad scope of all states is that this job can be performed from any virtual location- so the sales aspect is not tied down to a singular office location.

Thanks for the help!

 

[justalayman]

So, the new employer, since I would be a 1099, would not be subject to lawsuit, cease and desist letters, etc? It is only me that would have to deal with it? Just want to know what to expect.

the former employer could send the new employer a lot of things, even possibly enough to scare them into releasing you. No way to know what they might do and what your new employer might do in response.

I'm not sure about your take on CA though. From what I can find, CA courts refuse to take up non-compete cases.

what makes you think any action taken would be in a California court?

 

[manifestdestiny]

what makes you think any action taken would be in a California court?

Its not an educated guess, but to me it makes sense that the litigation would take place in the state in which the alleged violation of the non-compete occurs.

 

[justalayman]

Its not an educated guess, but to me it makes sense that the litigation would take place in the state in which the alleged violation of the non-compete occurs.

or maybe the state the contract was signed

and are you planning on dealing with possible customers only in California. It sounds like your "job" is not in fact based in California but are only considering residency to attempt to utilize their laws on the non-compete. Will any work actually be performed in California?

 

[manifestdestiny]

or maybe the state the contract was signed

and are you planning on dealing with possible customers only in California. It sounds like your "job" is not in fact based in California but are only considering residency to attempt to utilize their laws on the non-compete. Will any work actually be performed in California?

Yeah I'll have to look into that, its a possibility. I plan on contacting a lawyer next week, just trying to gather as much information/questions as possible first.

Customers can be based anywhere in the country, but the work is performed from my office, wherever that may be. There are no geographical needs as far as where customers would be located.