Noncompete Answers: Am I Bound If My Employer Violates FMLA?; Wages Cut Right After Signing; Can They Restrict My Livelihood?

Having received more questions on noncompete agreements than any other issue, I can only assume that more and more employers are imposing these contracts on employees all over the country. There are lots of defenses to them, but defending takes money. I continue to hope that some legislators will wise up and help their constituents escape indentured servitude, or that some attorneys general will start fighting illegal noncompetes with antitrust laws. In the meantime, I'll keep trying to answer your questions. I encourage anyone who is being asked to sign one, or whose ex-employer is trying to enforce one, to contact an employment attorney in your state for advice. Here are my general answers (not legal advice) to some more non-competition agreement questions:

If My Employer Violates FMLA, Am I Still Bound By My Noncompete?

Hi . I am a nurse, licensed in Kentucky. I had worked 6 plus years with a contact agency that was contracted to the state. My question is this - when an agency is contracted to such an entity, do they have to follow the state's policies and protocol for discipline? I had been a very well respected and appreciated employee that had been contracted to the same entity for over 12 years. When I was both working full-time and caring for my dying Father at home, I had periods of tardiness, which was never a past problem. I was ultimately released by both the Vendor and my agency. My question is this - was it not my agency's place to request - on my behalf - FMLA? I did win my unemployment case.Would I still be bound to my former agency's full non-compete ? 

Gloria L.

Hi Gloria. I'm sorry to hear about your father and the loss of your job all at once. As to the noncompete agreement, there's a defense to enforcement called "unclean hands." This defense means that if your employer wants to keep you from working for a competitor, they must have acted ethically and in good faith. If they broke the law or did something wrong to you, then a court might be persuaded not to issue an order that you can't work for a competitor.

As to whether they have to follow your state's policies, that will depend on their contract with the state. Does that get you anywhere in defending against a noncompete agreement? I don't know how, but it's possible maybe you'd have a wrongful termination claim in your state if they were bound by certain procedures.

Now, let's talk about that FMLA claim. You have to notify your employer of your need for FMLA in most cases. That means, when you saw that your productivity was slipping and you couldn't get in on time, you should have asked for FMLA, either regular or intermittent, so you could fulfill your duties as caregiver for your father. They'd have had to grant it based on what you describe. However, you didn't ask. Should they have offered it? It sounds like they were on notice that you were a caregiver and that you were in trouble, so maybe they should have. This might be a FMLA violation. You should talk to a Kentucky employment lawyer. 

Does all of this get you out of the noncompete? Maybe. Good luck!

I Signed, Then My Employer Cut My Wages

I was asked to sign a noncompete, & when I did was informed that my wages were being cut. No wages were specified in the contract, but had I known beforehand, I would not have signed. Also, less than a week after I signed it my hours were cut & have since been cut to zero. I have since signing, been in a hostile work environment & made to feel I'm doing everything wrong. I am now at zero hours. & I also believe I have grounds for a discrimination & sexual harrassment case. 

Tessa M.

Hi Tessa. In some states, continued employment is valid consideration for a noncompete agreement. That means employers in those states can shove an agreement in front of you and say, "Sign or be fired." However, if they knew they were about to cut your wages and then cut your hours to zero, they should have disclosed it before you signed. The defense you may have is fraud.

As I discussed above, discrimination and sexual harassment might also support a defense of "unclean hands." I'd suggest talking to an employment lawyer in your state about these two defenses and any other defenses you have to enforcement of this agreement.

Is It Legal To Restrict My Livelihood?

I work in Texas and I am reviewing a Non-Competition agreement with the following stipulations:

1.3 Non-Solicitation-Non-Competition. Without prior written approval of COMPANY X management, Consultant agrees:
 

(a) For a period of twelve (12) months following the termination of this Agreement or the relationship provided hereunder, Consultant will not, either directly or indirectly, call on, solicit, or induce any Consultant or employee of COMPANY X whom Consultant had contact with, knowledge of, or association with in the course of this relationship to terminate his or her employment with Company X.
(b) For a period of twelve (12) months following the termination of this Agreement or relationship provided hereunder, Consultant will not form or hold an interest in any entity that directly competes with COMPANY X.
(c) During the term of this agreement for a period of twelve months following termination of this agreement with COMPANY X, Consultant shall not solicit or induce, any past or current customer of COMPANY X to cease doing business, in whole or in part, with COMPANY X.

Is this legal to create this kind of document--affecting a persons livelihood for an entire year? If that company lays me off can they stop me from pursuing my line of work?

Would you suggest a strategy for filling out this paperwork?

Steve C.

Hi Steve. It really depends on what work you are doing and what kind of business this is. If you are a chemical engineer developing the new formula for Coke, then I can see how they wouldn't want you to go straight to work for Pepsi or form your own soda company. You have a vital trade secret that they need to protect. They might have a legitimate interest to protect. However, if you're contracted to do their landscaping or waste removal, it's hard to imagine any possible interest they would have to protect other than preventing competition.

An agreement that is solely for the purpose of preventing competition violates antitrust laws. 

Since you're a contractor, you can always say no. If they want you, then you have the power to negotiate more reasonable terms. The time to negotiate is before you sign.

If you have a question on noncompete agreements, discrimination, whistleblowing, employment contracts or any other employment law issue, and don't mind having me answer it publicly, feel free to ask it in the comments section. If you ask me here, you're asking for general information and not for legal advice. The question and answer will be public and will not be covered by attorney-client privilege, nor will it establish an attorney-client relationship. If you need legal advice or have an urgent legal issue that needs to be dealt with, contact an employment lawyer in your state.

Noncompete Answers - Company Lost The Customer Contract; Employer Owes Me Wages

On the ever-popular topic of non-competition agreements, I continue to get tons of questions. I'm answering some more today.

Is My Noncompete Agreement Enforceable If My Employer Owes Me Wages?

Q: My former employer wrote such an ambiguous non-compete that it virtually eliminates any chance of me finding any employment in my field. Plus they owe me $9500 and say they won't pay unless I provide them with proof I'm not competing.

They made exceptions to the non-compete during my employment and now say that I'm violating the agreement by continuing to do the exceptions that they allowed.

They are in Illinois - I am in Florida. 

Mr. High School

Hi Mr. High School. You raise several interesting issues, so I'll touch on all of them quickly. The one that I hear most often is whether a noncompete agreement is enforceable if your employer owes you wages. The answer is a whopping, clear-as-mud, maybe. If your noncompete agreement is part of an employment agreement that sets out your wage rate and other terms and conditions of employment, then the failure to pay those wages is a breach of the agreement. If they breached before you started working for a competitor, then the breach should eliminate your obligations. However, this may vary from state to state (and judge to judge) so I can't predict how a judge in the state where it ends up in court would see it.

If the noncompete agreement is separate and doesn't include any promises about wages, then the issue is less clear. I'd still argue that the failure to pay the wages owed negates your obligations, but the question would really depend on the specific facts and contract language. I'd suggest talking to an employment lawyer in your state about this to be sure.

If they've made exceptions to the noncompete and allowed you (or coworkers) to compete in specific circumstances or with specific companies, it will be really tough for them to argue that they have a legitimate interest to protect in enforcing the restrictions against you alone (or you now, when you've previously been allowed).

You also mention that they're in a different state than you. If the agreement says which state's law applies, then that's probably which state law you'll be dealing with. If the agreement is silent on which state's law applies, it's probably the state where you executed the agreement. Frankly, Florida law is so horrid on noncompetes that you're probably better off if you can apply Illinois law (but I'll defer to any Illinois lawyers out there who disagree.)

My Company Lost It's Contract - Can I Stay?

I got two questions on this topic. Here they are:

Hi I signed a contract with a company that states I cannot work for myself, or any other company in my line of profession for 1 yr.. My contract is up in may and my boss has moved to South America. Since being over there he has messed my wages up and hardly replies to my emails. The customers are not contracted with this company and I would like to take them on myself. If my company has gone elsewhere and I took over the duties for the customers they left behind, where do I stand?

Lee B.

Hi Lee. I answered the issue about the unpaid wages above. I'll answer your question about your company moving after the question below.

Sounds like this is more of a hot topic than I knew. I am a victim also--I started working for company x in March 2004. A while after I started, the manager's position came open and they offered it to me. I am pretty sure it was at this time they made me sign a non-compete. (I am contract labor). The company that owned the building I was working in then was purchased by another company. In 2008 this building closed down and I transferred to another building. About 6 months later I was again asked to sign a non-compete. Now the company "x" that I work has lost their contract in the building so I am being told because of the non-compete I cannot stay and do the same type of work for the new company.

I applied and was going to be hired by the company that owns the building for a totally different type of job, but they are now saying they have a "policy" that states I cannot work for them for 12 mos. then have to reapply, when I was originally told by my supervisor that I could do any other job in the building other than the services they provide. Now that has changed. So, now am waiting for an answer from the new company as to whether or not they can get me out of the non compete--which is slim to nothing chance. If not I will be looking for a new job and am restricted can't do the three jobs listed above, OR work in any of the buildings owned by current building I'm in.

I live in a rural area where there are virtually NO JOBS so I may be in the unemployment line because of this stupid non compete! I will never sign one again. 

Tired of This

Hi Tired of This. I'm tired of ridiculous noncompete restrictions too, which is why I enjoy fighting them when I can. To answer Lee and you, if your company has either abandoned a geographic area of business or lost the customer through someone's fault other than yours, such as through competitive bidding, then I think it will be really tough for them to prove there is any legitimate interest to protect in enforcing a noncompete agreement against you.

Remember, agreements that are for the sole purpose of preventing competition are illegal. They violate antitrust laws. Noncompete laws are an exception to antitrust laws. Your employer must show a legitimate interest to protect. Legitimate interests might be things like trade secrets, confidential information that's truly confidential and not available from public sources, and customer goodwill. If they can't show a legitimate interest other than preventing competition (or spite) then they should lose in court.

The problem is, most employees don't have the resources to fight if they're sued, and most new employers will just fire you if they get a nastygram from your former employer because they don't want to be in the middle of a lawsuit. I'm hoping that the Department of Justice and some state Attorney's General will start stepping up for the common man and enforcing antitrust laws against bullying employers.

In the meantime, you should contact an employment lawyer in your state about your rights.


If you have a question on noncompete agreements, discrimination, whistleblowing, employment contracts or any other employment law issue, and don't mind having me answer it publicly, feel free to ask it in the comments section. If you ask me here, you're asking for general information and not for legal advice. The question and answer will be public and will not be covered by attorney-client privilege, nor will it establish an attorney-client relationship. If you need legal advice or have an urgent legal issue that needs to be dealt with, contact an employment lawyer in your state.

Can My Employer Enforce A Noncompete When We Get Our Customers Through Bidding?

Noncompete laws vary from state to state, but whether in a state like Florida where noncompetes can frequently be enforced or in a state that is more employee-friendly, if an employer wants to enforce a noncompetition agreement, it will have to prove a legitimate interest to protect.

In Florida, the statute allowing noncompete agreements also says: “Any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable.”

Florida’s noncompete statute defines the term “legitimate business interest” to include: (1) trade secrets, (2) valuable confidential business or professional information that does not qualify as a trade secret, (3) substantial relationships with specific prospective or existing customers, clients or patients, (4) customer, patient or client goodwill, and (5) extraordinary or specialized training.

In one Florida case, the court said, “any competition by a former employee may well injure the business of the employer. An employer, however, cannot by contract restrain ordinary competition. In order for an employer to be entitled to protection, there must be special facts present over and above ordinary competition. These special facts must be such that without the covenant not to compete the employee would gain an unfair advantage in future competition with the employer.”

How does this apply if you get your customers through competitive bidding?

Courts have refused to enforce noncompetition agreements in Florida where the employer did not have substantial relationships with specific prospective or existing customers. If the customer is putting jobs out for bid, your employer may have a tough time showing it has substantial relationships with them. If they make purchases with whichever vendor is cheapest or makes the best offer, the courts may refuse to enforce your noncompete agreement. A request for a bid sent out publicly is pretty much like an ad in the yellow pages: anyone can respond, including your employer's competitors.

Where a court may draw the line is if you participated in preparing a bid for your employer, then use that confidential information to prepare your own bid for the same job undercutting them. That’s because you have valuable confidential business information about that bid. However, if you leave your employer and put in bids for jobs you weren’t involved with when you worked there, you may be okay.

Nothing in noncompete law is black and white. It’s pretty much all shades of gray. But employers try to enforce noncompetes that aren’t supported by a legitimate interest all the time. If you think your employer shouldn’t be able to enforce your noncompetition contract because customers are obtained through competitive bidding, talk to an employment lawyer who is familiar with noncompete agreements in your state to discuss your rights.