That’s a complex question because non-competition agreements are complex and they come in a lot of varieties. And oftentimes an agreement will say it’s a non-compete agreement, but when you read the text of it it’s not quite as restrictive as you might think by labeling it as a non-compete agreement.
So the first provision that is the most restrictive is a full-on non-compete, which means that the worker who works for company A cannot go out and compete in the marketplace if they start their own business or they go work for company B. For example, you have a shoe salesman who sells shoes for company A and has a book of business of places, of maybe wholesale shoes, and sells to a bunch of businesses in Memphis and a non-compete agreement would say, “Okay, Mr. Worker, you can’t sell shoes to anybody in the city of Memphis for a period of time.” And that’s a non-compete agreement.
Now, another form of non-compete agreement is what they call non-solicitation agreement, where you can’t solicit the customers of company A if you leave the employment of company A. So in that circumstance I might have five shoe stores in the city that I’ve sold shoes to and a non-solicit agreement would say I can’t go and do business with those five stores for a period of time, but I’m free to go and call on other business that I haven’t done business with before. I’m allowed to compete, I’m just not allowed to solicit those customers.
Another form of restriction may be a restriction on the use of confidential, proprietary or secret information. And that sometimes will be a separate clause or it might be a justification for the non-compete or non-solicit clause. And that restricts the worker’s ability to use certain information in competition in another employment setting. And when those two things come together it can be a real problem for finding subsequent employment or starting your own business. It frankly becomes a real hurdle in moving on to that next employer, at least within that industry.
So none of these would, for example, preclude that particular sales person from going and selling ties to those stores or selling ties to someone else even if there’s a non-compete agreement, provided that the company A doesn’t sell ties, it only sells shoes.
So each agreement, you have to review it very carefully and you have to review it for the particular circumstance at hand. It’s not a one size fit all, and that’s why it can be very, very complex.
*This is a transcript of the Facebook Live video from 3-16-18 Click here to watch the video.