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Leaving Distributor to work for Manufacturer - Agreement Worries

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reallyneedhelp

Junior Member
What is the name of your state (only U.S. law)? CA

Hello and thank you for taking the time to look over my current situation and thank you in advance for any response you could provide.

I believe I am going to get into some legal battles with my current employer due the fact that I am going to be leaving them to go work for a Manufacturer that attempted to do business with my current company but they decided not to do business with them and to go with another Manufacturer. I've worked here for 2 years and I have already put in my resignation letter and accepted the offer to the manufacturer. I'm going over my employee agreement and there are some pretty bold wordings in it that would assume that they are forcing me to not work for any competitor or similar business for 5 years and within a 10 mile radius. The company I work for now is a prepaid wireless wholesale distributor that distributes everything from sim cards to cell phone accessories. They also happen to sell devices to independent wireless retailers and distributors across the country. They are not a Manufacturer.

The company I am going to work for is a manufacturer of their own wireless handsets and are publicly traded and my role will be director of sales and will be trying to penetrate the prepaid wireless industry across the country There is def going to be overlap of customers because my current company has a very big customer base and the new company I am going to work for will eventually end up selling to some of their customers since they all happen to fall in the same pie. Throughout my tenure I have managed to build some very strong relationships in the industry and I plan on doing business with them. I plan on trying to find independent retailers and distributors to sell my product as well because thats the space we work in.

My CEO of my current employer has verbally threatened to sue me for lost wages if I solicit any of his customers. Do I have any protection towards this since I will be going to be working for a Manufacturer of a handset and not the same business as he is in which is a distributor of all products including handsets? If I approach him and ask him to do business with my company and he declines shouldn't I have the right to try and sell my product that they don't sell to whomever I choose?

There a lot of other things that come in to play on why I even decided to accept any offers and thats because of hostile work environments and broken promises but thats besides the fact. I want to move on as smoothly as possible and I know its going to get dirty and dont know how much protection I have. I also heard that in the state of CA that the non-compete rule does not apply but not sure how much that could impact the situation of soliciting customers.

I feel like my current company is trying to hand cuff me from what I know best and it's very unfair.

Any insight would be greatly appreciated.

Thanks!
 


LdiJ

Senior Member
What is the name of your state (only U.S. law)? CA

Hello and thank you for taking the time to look over my current situation and thank you in advance for any response you could provide.

I believe I am going to get into some legal battles with my current employer due the fact that I am going to be leaving them to go work for a Manufacturer that attempted to do business with my current company but they decided not to do business with them and to go with another Manufacturer. I've worked here for 2 years and I have already put in my resignation letter and accepted the offer to the manufacturer. I'm going over my employee agreement and there are some pretty bold wordings in it that would assume that they are forcing me to not work for any competitor or similar business for 5 years and within a 10 mile radius. The company I work for now is a prepaid wireless wholesale distributor that distributes everything from sim cards to cell phone accessories. They also happen to sell devices to independent wireless retailers and distributors across the country. They are not a Manufacturer.

The company I am going to work for is a manufacturer of their own wireless handsets and are publicly traded and my role will be director of sales and will be trying to penetrate the prepaid wireless industry across the country There is def going to be overlap of customers because my current company has a very big customer base and the new company I am going to work for will eventually end up selling to some of their customers since they all happen to fall in the same pie. Throughout my tenure I have managed to build some very strong relationships in the industry and I plan on doing business with them. I plan on trying to find independent retailers and distributors to sell my product as well because thats the space we work in.

My CEO of my current employer has verbally threatened to sue me for lost wages if I solicit any of his customers. Do I have any protection towards this since I will be going to be working for a Manufacturer of a handset and not the same business as he is in which is a distributor of all products including handsets? If I approach him and ask him to do business with my company and he declines shouldn't I have the right to try and sell my product that they don't sell to whomever I choose?

There a lot of other things that come in to play on why I even decided to accept any offers and thats because of hostile work environments and broken promises but thats besides the fact. I want to move on as smoothly as possible and I know its going to get dirty and dont know how much protection I have. I also heard that in the state of CA that the non-compete rule does not apply but not sure how much that could impact the situation of soliciting customers.

I feel like my current company is trying to hand cuff me from what I know best and it's very unfair.

Any insight would be greatly appreciated.

Thanks!
I think that your current boss would have a hard time making a lawsuit fly in your scenario. Any competition would be indirect and very marginal.
 

reallyneedhelp

Junior Member
I think that your current boss would have a hard time making a lawsuit fly in your scenario. Any competition would be indirect and very marginal.
If they were to see that an email blast or a direct mailer was sent to one of their customers could they pursue any legal action? I have compiled my own list of customers that I have relationships with and know they would get really upset up if they knew I went after them. But that is who my channel is and what my new employer expects me to go after.
 

eerelations

Senior Member
It's not the non-compete part of your employment agreement you should be worried about, it's the non-solicitation part. If you signed an agreement with a non-solicitation section in it, and that section says you won't solicit customers for a period of time after leaving the company, then if you do leave and solicit this company's customers, this company may sue you if it wishes. If it does sue you, it will likely win.

However, some of this depends on the actual wording of the contract. To determine how enforceable it is, you need to run it past an attorney.
 
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LdiJ

Senior Member
It's not the non-compete part of your employment agreement you should be worried about, it's the non-solicitation part. If you signed an agreement with a non-solicitation section in it, and that section says you won't solicit customers for a period of time after leaving the company, then if you do leave and solicit this company's customers, this company may sue you if it wishes. If it does sue you, it will likely win.

However, some of this depends on the actual wording of the contract. To determine how enforceable it is, you need to run it past an attorney.
However, the solicitation would have to be something that would compete with or negatively impact the current employer's business. I am just not seeing that in this context. His current employer is a distributor who distributes many products within an industry. His new employer is a manufacturer who manufactures one product that happens to be within the same industry.
 

reallyneedhelp

Junior Member
My current employer does sell Wireless handsets but a completely different brand however they are similar devices. Think samsung and LG but in a different channel.

My current employer has the ability to sell all brands direct to retailers and distributors and I would be going after the same type of customers trying to sell my one brand directly working for the manufacture. It could possibly sway my current employers customers to start buying my brand vs. The brands that my current employer carry if they begin to like working with me and like my product and margins better.

The problem is...my current employer thinks everyone is their customer because they have sold at least 1 product to them in the past and that would prevent me from trying to gain relationships from the market if I have to worry about my current employer threatening me.

Even if they had a case what are my best and worst case scenarios? What could they sue me for and does that mean I'm stuck and can't work for the new company because I would be hand cuffed to non-solicitation forever? There is no time limit in my agreement and I have been in the same industry for 15 years and many of the same customers I had relationships with in the past so how could they determine this?

Sounds like a big mess.
 

LdiJ

Senior Member
My current employer does sell Wireless handsets but a completely different brand however they are similar devices. Think samsung and LG but in a different channel.

My current employer has the ability to sell all brands direct to retailers and distributors and I would be going after the same type of customers trying to sell my one brand directly working for the manufacture. It could possibly sway my current employers customers to start buying my brand vs. The brands that my current employer carry if they begin to like working with me and like my product and margins better.

The problem is...my current employer thinks everyone is their customer because they have sold at least 1 product to them in the past and that would prevent me from trying to gain relationships from the market if I have to worry about my current employer threatening me.

Even if they had a case what are my best and worst case scenarios? What could they sue me for and does that mean I'm stuck and can't work for the new company because I would be hand cuffed to non-solicitation forever? There is no time limit in my agreement and I have been in the same industry for 15 years and many of the same customers I had relationships with in the past so how could they determine this?

Sounds like a big mess.
I really don't think its as much of a mess as you think it is. However, do run it by a local attorney who can read the agreement itself and give you advice.
 

justalayman

Senior Member
However, the solicitation would have to be something that would compete with or negatively impact the current employer's business. I am just not seeing that in this context. His current employer is a distributor who distributes many products within an industry. His new employer is a manufacturer who manufactures one product that happens to be within the same industry.
I suspect you missed the part where the op states the manufacturer will be in direct competition with the current employer and will be attempting sell to the same customers
 

justalayman

Senior Member
But isn't there something in california specifally that non-competes are not enforceable.


But even with that, the non-solicitation and retaining what may be protected information is still going to be a problem.

A ensuing suit would not be based on "lost wages" (whatever that was supposed to be referring to) but a much more lucrative action due to the retention of protected information obtained as an employee of the current employer.
 

LdiJ

Senior Member
I suspect you missed the part where the op states the manufacturer will be in direct competition with the current employer and will be attempting sell to the same customers
I don't see this as direct competition. Yes, I agree that they will be selling to some of the same customers but I do not see it as direct competition. The distributor has a broad range of products and the manufacturer does not. There is some minor overlap but not enough, in my opinion, to call it direct competition.

This is the type of industry where there everybody is going to be targeting the same base of customers, whether they have any experience in the industry or not. This is not the type of industry where its one choice or the other.
 

justalayman

Senior Member
It's direct competition because they sell competing products (phones) to the same customer base. I don't see how that can't be considered a competitive situation.


While normally a manufacturer would not be in competiton with a retailer, it appears this manufacturer is selling directly to the end consumer.

It doesn't matter that the current employer also sells products that are not competing with this manufacturer. What matters is the sell some product that is the same market as the manufacturer.


But again I raise the question; I thought california has ruled non-competes are not enforceable.
 

eerelations

Senior Member
Again, it's not the non-compete part of the agreement that's a problem, so whether or not non-compete agreements are enforceable in California is moot.

Non-solicitation agreements are enforceable in California, and if the OP's agreement includes non-solicitation of customers clauses, then OP may indeed be in for some legal doo-doo. This depends on how the non-solicitation clauses are worded - they may allow attempting to sell different products to existing customers, or they may prohibit attempting to sell different yet similar products to existing customers. Or a myriad of other things that come to mind.

We have no way of knowing exactly what the contract says, and OP seems to be unable to understand it enough to convey to us what it says. Ergo, if OP wants to know the extent of legal doo-doo he may be in for, he really really needs to run this agreement by an attorney.

(Please keep in mind folks that I write and enforce these types of contracts for a living. So I know what of I speak. :) )
 

LdiJ

Senior Member
It's direct competition because they sell competing products (phones) to the same customer base. I don't see how that can't be considered a competitive situation.


While normally a manufacturer would not be in competiton with a retailer, it appears this manufacturer is selling directly to the end consumer.

It doesn't matter that the current employer also sells products that are not competing with this manufacturer. What matters is the sell some product that is the same market as the manufacturer.


But again I raise the question; I thought california has ruled non-competes are not enforceable.
California mostly has from my recollection.

However, I still want to address the other issue....

Example: Walmart as a retailer buys many products from many different distributors and manufacturers. They buy many brands of the same type of products. Even if a non-compete were enforceable, it would be nearly impossible for one distributor or manufacturer to enforce a non-compete because Walmart is going to be buying those products, no matter who works for the distributor or manufacturer.

However, Walmart contracts with specific companies to produce their in home brand "Great Value" products. Therefore should someone "steal" that business away from one of the current suppliers, that would be a type of direct competition worthy of a potential non compete.
 

justalayman

Senior Member
No LdiJ. It is quite simple

If I sell rocks and company r sells rocks and we both include you in our regular customer base, then we are in direct competition in how a non-compete would be involved.


If one wants to argue that i sell marble and company r sells granite, if it is for the same market, it is still direct competition


Direct competiton is easily defined as;

Does the same customer have the ability to by the same product or a product serving the same purpose from two different sources? Is so those sources are direct competitors. Nothing else matters.
 

eerelations

Senior Member
Hey hey hey folks!!! For heaven's sake please read my posts!!! Non-compete and non-sol clauses are two completely separate and different things!!!

The OP doesn't have a non-compete problem, he has a non-sol problem. He thinks he has a non-compete problem because he's confused by the terminology. However if you read every word of his posts you will see it's actually a non-sol problem. My Esteemed Colleagues continuing to argue back and forth about non-competes is not only irrelevant, it confuses the OP even more than he already is.

Again, please read my posts if you want a better understanding of all this. [tired emoticon here]
 

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