Question

An insurance firm, Brown & Brown, Inc., hired Theresa Johnson to perform actuarial analysis. On her first day of work, Johnson was asked to sign a covenant not to compete, which prohibited her from servicing any of Brown's clients for two years after leaving the firm. When Johnson's employment with Brown was terminated years later, she to work for Lawley Benefits Group, LLC. Brown sued to enforce the covenant.

A court ruled that the covenant was overly broad and unenforceable because it attempted to restrict Johnson from working for any of Brown's clients, without regard to whether she had a relationship with those clients.

Suppose that a non-solicitation or non-compete agreement is held to be unenforceable, but that the employee has violated what would have been its terms by competing with the employer. Are there other causes of action that the employer might assert against the employee?

Should an employer be able to restrict a former employee from engaging in a competing business on a global level?

Answer 1

Validity of 'non-compete' provision

   Many organizations currently have a practice of including 'non-compete' provisions in the job cotract with their employees. General terms of a non-compete clause is that an employee is not allowed to 'compete' with the employer by providing service independantly or by joing a competitor during the service time and a stipulated period after leaving the organization.

Restricting an employee to join any organization after leaving the current job is against 'contract act' and will not stand in a court of law. law of the land gives freedom to assume any lawful profession as he/she wishes except in some defence related positions. Court is not expecting an employee van harm any organisation by practising a lawful position. So any restriction against it is unlawful.

Deviations

There is a provision called fixed term clause which restricts the employee from joining a competitor for a notice period. During that period the organisation has to give salary. Fixed term cotract is not restricting the employee to leave the organisation at the emplyee's interest but restricts him from joining another job for an agreed up on duration known as notice period, with a pay.

The coverage and validity of non-compete clause changes from one jurisdiction to another. In California this clause is considered to be valid for equity stakeholders inthe sale of business interest. In US , radio and teleivision personalities are bound to obey this clause until the contract with the current expires even if he/she resigned, expelled or laid off during the contract period. In general about 14% workers in US without college degrees covers by this clause. In the case of sales as well as dissolusion of an organization this clause is applicable for owners for a stipulated time.

Other related restriction clauses

There are other more or less similar clause which may be applicable case to case and as per jurisdiction. Some are furnished below.

1. Forfeiture-for-competition agreement:- This clause in agreement allows an employee to join the a competitor by forfeiting certain benefits while leaving

2. Comnsation-for-competition agreement: This clause akes the employee pay a crtain amount to join a competitor.

3. Nondisclosure or Confidentiality agreement: This clause restricts employee from disclosing certain agreed upon confidential information about the employer.

4. Non-solicitation agreement: This agreement restrict an amployee to join a cometitor for a stipulated period.

5. Invention assignment agreement: This restricts the employee to expose the invention related information of the employer.

All the above clauses are applicable only as per jurisdiction and law of the land. Only invention assignment agreement is considered as fully enforcable and all others vary by case to case.

Conclusion

In general, all these non-compete clauses will not stand valid as per law in many jurisdictions all over the world as it is against the contract laws. In some jurisdictiins some clauses as mentioned above are applicable as per the law of the land.