Transportation Brief: Non-compete Agreement Considerations
January 21, 2019
Non-compete Agreement Considerations
Many motor carriers have experienced both the offensive and defensive side of non-compete agreements. On one hand, they have drafted agreements to protect their legitimate business interests (e.g., customer relationships and confidential information). On the other hand, they have tried to hire workers who are subject to their own non-compete agreements. Unfortunately, this area continues to be marked by uncertainty. Perhaps no other form of contract so frequently causes the relevant parties to huddle with their attorneys and ask the question, “Is this thing enforceable?”
Contributing to the uncertainty, these agreements are usually governed by state law, and the enforcement rules can vary significantly from state to state. For example, with a few exceptions, California courts will not enforce non-compete agreements against departing workers, and a Massachusetts statute places severe limits on post-employment restrictive covenants – giving it perhaps runner-up status as the most difficult jurisdiction for the enforcement of non-compete agreements. The result is a difficult-to-understand myriad of rules that apply nationwide.
In this challenging enforcement environment, motor carriers should pay close attention to the rules in their jurisdiction and endeavor to draft agreements that meet only their specific needs. Enforcement will depend on a motor carrier’s success in convincing a court that it was deliberate in crafting a narrowly-tailored agreement designed to protect a legitimate, protectible interest. When enforcement problems arise, they usually result from over-reaching:
Asking all employees to sign non-compete agreements rather than just those with customer relationships or access to confidential information.
Inserting a geographic restriction that is too broad and far exceeds the worker’s geographic area of responsibility.
Insisting on a broad geographic non-compete when a more limited (and more enforceable) client-specific non-solicitation provision would suffice.
Prohibiting a worker from working in any capacity for a competitor.
From a defensive standpoint, motor carriers should consider the consequences of hiring an employee who is subject to an ongoing non-competition obligation to a former employer. This consideration should include an analysis of whether the prospective employee can be effectively utilized as limited by the ongoing covenants, and the cost and distraction of becoming embroiled in a potential noncompete lawsuit.
Scopelitis’ Transportation Brief® is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
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