I signed a non-compete for the company I'm with now. However, over the last 6 months, the original salary we agreed to and the commission we also agreed to has been drastically cut. The owner has made comments quite often "if we make it through the next few months" or something like "if we don't go bankrupt"...it began to make me worry and I started reaching out to other employers in my field.

However, I've come to the conclusion that I would much rather open my own business and have my future in my own hands. My question is, since the original terms we agreed to were not held up on his end, does he have a leg to stand on with the non-compete clause I signed if he decides to come after me for it?

I'm not a lawyer, but my experience is that it depends on the language of the non-compete and the state (assume Texas). Mostly the enforceable components are if the non-compete was directly tied to compensation, stock, of a reasonable scope of time, distance, etc. the second, more enforceable language is a non-solicit of existing clients.

The biggest risk is if any compensation was offered as part of agreeing to the non-compete. You could easily owe that back if you violate.

lockett93 said:

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I'm not a lawyer, but my experience is that it depends on the language of the non-compete and the state (assume Texas). Mostly the enforceable components are if the non-compete was directly tied to compensation, stock, of a reasonable scope of time, distance, etc. the second, more enforceable language is a non-solicit of existing clients.

The biggest risk is if any compensation was offered as part of agreeing to the non-compete. You could easily owe that back if you violate.

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Thank you. No compensation was offered up to sign no -compete.

Not a lawyer either but if the non-compete was signed at start of employment, any sort of signing or relocation bonus could potentially be considered payment for non-compete.

Get a lawyer and discuss your options. The breach in contract could give you some options for negotiation if they want to uphold the NCP.

If not non compete was signed at start of employment, then that will be considered "compensation" for signing, in general, if someone walked into your office one day and had you sign something, it may not be enforceable.

Not sure subsequent compensation paid to you that was not part of the non compete would otherwise make it enforceable.

Assuming this is Texas, it is a right to work state and non competes are generally only enforced over the non solicit provision. If your current company is failing and you think you can go it on your own, this is probably your biggest area of risk.

Not a lawyer and none of this is legal advice. I would engage an attorney particularly if you want to go at it on your own and review the particulars of your agreement, situation and intentions to determine most appropriate steps.

lb3 said:

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Non competes are difficult to enforce. I would say talk to an attorney about how to structure your business to minimize your risk. And in the meantime, start preparing to take your clients with you.

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Taking the client list carries risks beyond a non-compete. Client lists and other business information can fall under state and federal trade secret laws. While trade secret protections require several steps your current company would need to take to identify and protect the trade secret, litigation can be expensive even if you win.

I would avoid transferring any files from work to personal going forward or even accessing any file at work that you don't need to do your job. If you do leave and start your own business, there are companies that can come in and look at all your digital behavior for months to see if you took anything. Attended a trade secret seminar recently where one of these talking about how they use behavioral changes in an employee to determine when they started looking for a way out and then looked at their digital history since that time, including every file they transferred and every file they accessed.

lb3 said:

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Non competes are difficult to enforce. I would say talk to an attorney about how to structure your business to minimize your risk. And in the meantime, start preparing to take your clients with you.

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While non-competes are difficult to enforce, if it's a big enough organization (or one angry enough), they can bleed you dry financially by forcing you to pay attorneys and defend your actions in court. That includes situations where you necessarily haven't done anything wrong.

lb3 said:

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Throwout said:

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lb3 said:

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Non competes are difficult to enforce. I would say talk to an attorney about how to structure your business to minimize your risk. And in the meantime, start preparing to take your clients with you.

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While non-competes are difficult to enforce, if it's a big enough organization (or one angry enough), they can bleed you dry financially by forcing you to pay attorneys and defend your actions in court. That includes situations where you necessarily haven't done anything wrong.

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His company is on the verge of bankruptcy, it's not Google trying to hold onto their self driving engineers and technology.

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Yes, but it is entirely possibly that a petty owner tries to recover some of his losses from an employee that left right before the end and started a competing business. Wouldn't be the first owner of a company that wants to blame a business failure on anyone and everyone but the guy in charge.

Meant to post this earlier, but have you considered the option of approaching the owner and asking to be released from non-compete and then potentially working on an arrangement where you compensate him for the option to take several existing clients with you? Obviously that is a path to do down only once, but if you are prepared to leave regardless you could consider this route and avoid having him come after you.

As others have said, once can certainly try and bring action regardless of ultimate outcome and legal fees become a war of attrition... attrition of your wallet.

lb3 said:

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Throwout said:

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lb3 said:

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Non competes are difficult to enforce. I would say talk to an attorney about how to structure your business to minimize your risk. And in the meantime, start preparing to take your clients with you.

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While non-competes are difficult to enforce, if it's a big enough organization (or one angry enough), they can bleed you dry financially by forcing you to pay attorneys and defend your actions in court. That includes situations where you necessarily haven't done anything wrong.

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His company is on the verge of bankruptcy, it's not Google trying to hold onto their self driving engineers and technology.

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Being on the verge of bankruptcy has no bearing on the situation. And you're naive thinking that it's only big corporations that try to enforce their non-compete agreements.

BiochemAg97 said:

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lb3 said:

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Non competes are difficult to enforce. I would say talk to an attorney about how to structure your business to minimize your risk. And in the meantime, start preparing to take your clients with you.

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Taking the client list carries risks beyond a non-compete. Client lists and other business information can fall under state and federal trade secret laws. While trade secret protections require several steps your current company would need to take to identify and protect the trade secret, litigation can be expensive even if you win.

I would avoid transferring any files from work to personal going forward or even accessing any file at work that you don't need to do your job. If you do leave and start your own business, there are companies that can come in and look at all your digital behavior for months to see if you took anything. Attended a trade secret seminar recently where one of these talking about how they use behavioral changes in an employee to determine when they started looking for a way out and then looked at their digital history since that time, including every file they transferred and every file they accessed.

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does digital history include asking for LinkedIn connections with clients? If this is a normal behavior for a sales type of employee, is this enforceable as a bad digital behavior? If it is within somewhat the norm of the employee's behavior, seems it can't really be proved, although it can be litigated costing bunches of $'s.

In general, I advise people to connect to their customers early and often in the LI...

Non-competes may be difficult to enforce, but taking company files and trying to steal clients will suddenly make those clauses much easier to enforce.

ravingfans said:

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BiochemAg97 said:

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lb3 said:

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Non competes are difficult to enforce. I would say talk to an attorney about how to structure your business to minimize your risk. And in the meantime, start preparing to take your clients with you.

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Taking the client list carries risks beyond a non-compete. Client lists and other business information can fall under state and federal trade secret laws. While trade secret protections require several steps your current company would need to take to identify and protect the trade secret, litigation can be expensive even if you win.

I would avoid transferring any files from work to personal going forward or even accessing any file at work that you don't need to do your job. If you do leave and start your own business, there are companies that can come in and look at all your digital behavior for months to see if you took anything. Attended a trade secret seminar recently where one of these talking about how they use behavioral changes in an employee to determine when they started looking for a way out and then looked at their digital history since that time, including every file they transferred and every file they accessed.

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does digital history include asking for LinkedIn connections with clients? If this is a normal behavior for a sales type of employee, is this enforceable as a bad digital behavior? If it is within somewhat the norm of the employee's behavior, seems it can't really be proved, although it can be litigated costing bunches of $'s.

In general, I advise people to connect to their customers early and often in the LI...

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No. Bad digital behavior would be downloading files (transferring to flash drive, emailing to personal account, uploading to drop box), accessing files you shouldn't. Even accessing files at a different frequency than usual could raise a red flag.

It is typical that the consideration for signing the non-compete is future employment. As others have said, the enforcability of the non-compete can vary from state to state, but the nonsolication of employees/customers and the nondisclosure provisions which are usually included tend to be highly enforceable.

The real question is would your employer take action to enforce? Whether he would prevail or not is a separate question but he could tie you up for a while and cost some money.

If he goes BK it seems unlikely unless he views your departure as hastening the business failure.

One thing you could consider if feasible is to work for a competitor but with duties that do not viloate the non-compete. Trickly but has been done.

Good luck.

My wife was asked to sign a non-compete when switching companies. What state you signed the agreement under will have a huge impact on your options. I always thought like many others that they were essentially worthless to the company. But, we decided to ask a lawyer to look over the agreement and were surprised to learn that (here in Florida at least - also a right to work state) non-competes are EXTREMELY enforcable and should be taken very seriously.

The one she was asked to sign would have made her unable to work in her field, nation-wide for several years. Our attorney said the courts here routinely rule in favor of the company, and they are not required to consider potential impacts to the employee (i.e., they can't work anywhere).

Spend the money and speak with a lawyer. Thankfully, my wife was able to successfully red-line the non-compete clause -- although we accepted the remaining provision related to taking clients, etc. Again, spend the money and speak with a lawyer, these are not necessarily as easy to fight as many believe.