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Friday, February 28, 2014

If Your Contract Says It Isn't A Contract Is It A Contract?

A reader asks this question in the comments to my post Non-Compete Agreements - Top 5 Ways To Get Out of Yours
In 2012 my husband started working for a contractor. As a subcontractor he signed a subcontract agreement. In which case has schedule of payment as 45 days net and the non compete agreement. As he did sign it but in bold letters it states THIS IS NOT A BINDING CONTRACT AND CAN BE TERMINATED ANYTIME FOR ANY REASON. In 2013 he got let go because they butted heads. (not because he did bad work). Its now been over 125 days and yet still no payment. Does that mean the non compete still applies?
 You gotta love a contract that says it isn't a contract and isn't binding. I actually see this all the time in employee handbook acknowledgements that employees have to sign. I like to point to this language when the employer turns around and tries to enforce noncompete language in the handbook. My conversation usually goes something like this: "Hello? You put right here that it wasn't a contract. Are you saying it is now? Because then I think my client has claims for your failure to follow the progressive discipline policy, along with a bunch of other claims for your failure to follow your own policies." That is usually met with a bunch of muttering under the breath and a quick, "I'll get back to you."

I can't say I've ever seen this kind of weaselly language in a document called "contract" or "agreement." This raises an interesting question. If the document's title says it's a contract, but the language in the document says it isn't a contract, then what the heck is it?

The one thing it isn't is a contract. That means, IMHO, that your noncompete obligations in the document are also not a contract that they can enforce. Would a judge agree with me? Maybe. The issue, if they had the nerve to sue over this non-contract contract, would be the intent of the parties. I assume the employer will say something like, "I meant that it was terminable at will, not that the noncompete part wasn't a contract." I don't think this would fly, since any ambiguity is supposed to be construed against the drafter.

The other issue is the failure to pay all sums due. Once they breach a contract (assuming it's a contract) then your obligations should be null and void. Again, I can't guarantee a judge would agree with me, but there's plenty of case law in Florida on this and presumably every other state has similar cases. This is basic contract law - once a party breaches a contract, the other party's obligations vanish.

If you haven't been paid wages due, then you probably also have claims under your state's unpaid wage laws, unjust enrichment, wage theft, breach of verbal contract, or some other legal theory. You should talk to an employment lawyer in your state about what claims you have and let them review your agreement to see if they agree that your noncompete may not be binding

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I appreciate your comments and general questions but this isn't the place to ask confidential legal questions. If you need an employee-side employment lawyer, try http://exchange.nela.org/findalawyer to locate one in your state.