MSU Red Cedar Message Board

Some of these non-compete clauses, especially those that pop up in "standard" employee indoc 'forms' after hiring can be attacked as a "contract of adhesion." [google it for a basic laydown].

Very common in the securities industry, some medical professional groups, or manufacturer rep firms. The noncompete clause may be unenforceable, but what you have to watch out for are three issues:

- forum selection clause: You agree to have disputes resolved in a certain state or court in that state. Gets expensive if you leave the area, are sued and have to defend yourself thousands of miles away. Be careful.

- arbitration: Watch out here. Never agree to give up your right to resolve problems in front of an arbitration 'panel.' You are already doing it with financial services firms like credit card issuers or as a client of brokerage firms - never agree to this as an employee not in a regulated industry.

- liquidated damages: You agree to "hold harmless or 'reimburse' the employer" if you contest a dispute w/o going thru arbitration first. Never agree to a punitive condition like this. You could end up paying their costs, including atty fees, if you lose. Usually not an issue in most cases *unless* you agree to it up front in an employment contract.

This, and I am a lawyer.

I don't practice law in New York, and I never have. State law can vary greatly on this issue. So please understand that I am merely setting forth general rules about non-compete clauses in employment contracts here. If you want reliable legal advice, you need to speak with an attorney who practices law in New York and you need to tell him/her all the facts.

Generally speaking, non-compete clauses impose a restraint on trade and are therefore not favored by courts. That's good news for you. Usually, in order for a non-compete clause to be enforceable, the restriction has to be reasonable in terms of geography, time, and what it prohibits. In sorting out reasonableness courts will generally look at (1) how a non-compete affects the employee, (2) whether the non-compete was necessary to protect some legitimate interest of the company, and (3) how it affects the public at large.

In many jurisdictions, a non-compete clause has to be very carefully worded. If the clause is overly broad, courts are likely to strike it down. Also, a non-compete clause sprung on a new employee after the initiation of employment may (I emphasize MAY) sometimes be struck down for lack of consideration.

Please keep in mind the disclaimer in the first paragraph. These are general principles. As someone else wisely pointed out, these cases are very, very fact sensitive. If you want good legal advice, hire a lawyer, give him/her all of the facts and get him/her a copy of the proposed clause. But keep in mind that his/her service will not be free--or even cheap.