NY Non-Compete Convenant questions...

[benf]

I live in New York state and recently left my job. Shortly after leaving, I took up a service contract with a customer of theirs. I did this mostly because I did not believe (did not remember) I signed a non-compete agreement with my Employer.

In a phone call that I was included in via speakerphone (without my former employer's knowledge I was included) they stated to the customer that they would not finish the work they were under contract to finish, and stated that it was because they were not going to come after the customer for my violation of the non-compete convenant. I wrote them a letter stating very professionally that I did not remember any such agreement and would appreciate it if they could forward the agreement on to me. I didn't expect to receive it, but I did. It turns out I signed one about four months after I was hired.

I have a few questions about it now, given my situation.

1) I understand that you have to be compensated for signing a non-compete agreement (consideration on both sides and all) and that hiring can count as consideration. Is it still the case since I singed the agreement so long after being hired? If it is not, does the agreement need to explicitly state what is being offered to me in exchange for signing the agreement?

2) I also understand that it cannot be too restrictive or it is null and void. How do you feel about the following language?

"...the Employee shall not own, manage, operate, consult or to be employee in a business substantially similar to or competitive with the present business of the Company or such other business activity in which the Company may substantially engage during the term of employment."

It states in the previous paragraph that this agreement will be in effect for 2 years following termination, the cause or reason for termination nonwithstanding.

3) The Customer had already decided to terminate it's relationship with my employer before I left the company. The Customer was not going to pursue employing my company for the service work. The Customer approached me about signing up for the service work once they were aware I had left. I also had a relationship with this customer prior to both signing the agreement and being hired by my former employer. I 'brought' the account to the Company. Does any of this have any bearing on the enforcability of the agreement?

4) During our year-end meeting, the Company stated that software development and IT support (which is what I do) was only 40-50 percent of their business during the past year, and they expected it to diminsh to 10-15 percent during the coming year. Does that have any bearing on what is 'substantially similar or competitive'?

5) Does the fact that they have already stated they would not pursue it to the Customer count as any kind of binding verbal agreement? If so, does that apply more generally or purely to the customer in question?

Finally, while I do not expect them to actually do anything about this agreement, if they do decide to pursue it, what is their method of enforcement? If the Customer receives a cease and desist from my former employers, is it legally effective or does a court first have to prove that I am in violation of the agreement before I can be ordered to stop working?

Thanks for all of your help!

 

[SuzieWahoozie]

Noncompete agreements are iffy things. If well written they can be enforceable. If poorly written or too restrictive (which is subjective), thye can be useless.

No one on this board is going to be able to answer you. You need to take the agreement to an attorney versed in employment AND contract law and have them look it over and advise you.

 

[You Are Guilty]

Noncompete agreements are iffy things. If well written they can be enforceable. If poorly written or too restrictive (which is subjective), thye can be useless.

No one on this board is going to be able to answer you. You need to take the agreement to an attorney versed in employment AND contract law and have them look it over and advise you.

Not so fast there, pard-ner! NY, like every other state, requires a reasonable scope both temporally and geographically. 2 years is on the long end, time-wise and assuming there's no additional restrictions on geographic scope not posted, as it reads now, it appears to be unlimited, which is a big no-no.

However, seeing as no one is suing over it, all of this is moot

 

[TCA]

Having beenn on both sides of a non compete, I can tell you what I was advised by my lawyer is I needed to weigh the cost vs the benifit of fighting the non compete to keep the customers. Eventhough mine involved several gray areas it would have cost me at least $5k to fight it, in the end I decided that it wasn't worth it to try and fight it.

As for what they can do, more than likely they will go after you as you are the one who signed the non compete not the customer. As it sounds like you are a new business and that they are established and may have the funds and resources to pursue this matter in the court system. Even if they don't win they could possibly make it financially unfeasible for you to pursue.

From my understanding a non compete can't stop you from trying to earn a living but the fact that you took one of their customer's could cause you a problem.

 

[benf]

Thanks for the advice guys.

I was just looking for some general answers... trying to get a handle on what is important in these things and what isn't. As far as well written goes, it's three paragraphs long, the longest of which is devoted to confidentiality, so I don't think it's particularly tight.


And I don't believe they're going to sue because I'm taking customers off their hands that they've gotten a sour relationship with and they no longer want. It's kind of a win-win situation, except that they are vidictive and it wouldn't totally suprise me to see them pursue it just because they can...

Thanks again!

 

[TCA]

In my case we had not taken any of their customers but the non compete was very geographic specific, They were a developer who my wife worked for and her non compete stated that she would not be involved in any company that would directly or indirectly compete or provide services within the development eventhough many of these customes were reffered by other customers outside of the development.

Eventhough there was a 50/50 chance we could have won the case had it gone to court the possible business gain would not have orerridden the cost associated with any legal action.

 

[Tammy1234]

If they decided to sue, you would first receive a "Cease and Desist" order.

One idea for you is to ask this company if you could buy these clients from them. However, if your noncompete states you cannot operate your own business then this would definately be a red flag to your ex employer.