Need Help - ASAP Will not sign non-compete

GLC · June 2003

We recently did a downsizing and our EAP Manager has been reducted to part-time. We never had him sign a non-compete agreement but now have asked him to. He refuses to sign it because he says we should trust him out of all these years. We think because his position is PT, he may resign and take all the EAP clients. Can we legally fire him if he does not sign the non-compete. Anyone have any other suggestions if someone does not want to sign this. He has been an ee for 8 years.

Don D · June 2003

First, as an employer representative who has utilized a variety of EAPs, I don't think you will find that client companies will move or change at whim simply to follow an EAP Manager. Usually the employer or client links with an EAP because of a variety of reasons, least of which is the contact manager. Secondly, I would not continue to employ one who refuses to sign a standard course-of-business form, regardless of his motives or his explanations or the Forumites' speculation as to why he won't. Third, I certainly would never consider retaining a person who held me hostage to that sort of scenario. Fire him.

Parabeagle · June 2003

I strenuously recommend running this past a lawyer. Seems to me that in order to require an existing employee to sign a noncompete, he must receive some consideration. He must be given something of value in exchange for his signature. With new hires off the street that's not an issue and you can require them to sign as a condition of employment, but in the case of existing employees they have to be given something in order to secure their agreement.

Don D · June 2003

Tell him you'll agree to keep him employed. It's not as if he's giving up a damned thing!

Parabeagle · June 2003

A little cranky there, today, Don? x;-)

Don D · June 2003

Nope. Just being realistic, as usual. What you see is what you get. Photo coming.

Watson · June 2003

I agree with Parabeagle that you need to speak with an attorney in your state. Several states have nullified noncompete agreements on the grounds that they are too restrictive in nature. If you are reducing the employee to part time and at the same time asking him to sign an agreement that prohibits him from obtaining additional work in his field, that may be considered to be too restrictive.

scottorr · June 2003

I agree with Parabeagle and Watson. Most of the recent court case have nullified noncompetes. If this is a good employee, which seems to be the case if he has been employed for 8 years, why would you want to loose him over something that wouldn't stand up in court any ways. Think about it and consult an attorney before making a snap decision.

vmiller MO · June 2003

As an attorney I urge you to contact an attorney about this issue. Each state has a different view of noncompetes. Generally, you have to have (1) a protectable interest, (2)be reasonable in time, (3) be reasonable in geographic location. Each of these elements differ in meaning from state to state. In addition, there must be "consideration." Some states hold that continued employeed is sufficient. Other states require more, especially if the indiviual is already employed. There are a growing number of states dislike noncompetes and ban them on public policy grounds (i.e., California, New Jersey is also hostile to noncompetes). Finally, some states also have enforcement issues and look to the employer's conduct as a reason not to enforce a noncompete (i.e., in Missouri a breach of the employment contract by the employer will defeat the noncompete). Frankly, courts are becoming more relunctant in enforcing noncompetes when the employer RIFs the employee and does not provide severance pay for at least a portion of the noncompete period.

Good luck.
Vance Miller
Editor, Missouri Employment Law Letter
Armstrong Teasdale LLP
(314) 621-5070
[email]vmiller@armstrongteasdale.com[/email]

Shawn · June 2003

Let me play Devil's Advocate:

You hire a manager full time and don't feel a need to get him to sign a non-compete document. Now, you cut his hours and think he should be happy to sign a document that protects the company and limits him, at a time whe he may need additional income to support his family. It is no wonder he is reluctant to help you. If his job was vital, you should have figured out a way to keep him full time and happy. You have to think of the big picture.

Crout · June 2003

I don't see how the unwillingness of the courts to enforce non-compete agreements makes this guy bullet-proof. The original question was CAN they legally fire him....not SHOULD they fire him, and I think the answer is yes, agreement or not, UNLESS there are other factors not noted in the post. I agree with Don.

Steve McElfresh · June 2003

Lest Crout and Don be too alone, I would side with them as well if you confirm my assumptions:

- You have determined, in advance with your lawyer, that a non-compete is enforceable under the circumstances in your state,
- It appears to be a reasonable under the circumstances, and
- Requiring this is now SOP for all similarly situated employees.

If these are true, then you create a greater risk by backing down in this instance than by holding tight. On the other hand, if one of these is NOT true, you need to stop and look how you got yourself backed into this particular, ugly corner.

You have received some good advice on the issues with enforcability, but note that it needs to be a situation-specific determination with your attorney, to feel any confidence. Hopefully you did this BEFORE someone announced this new "requirement."

Clue to newbie HR-ers about new "requirements" (in Calif., it would commonly be binding arbitration). When senior management tells you to enforce a new job requirement going forward , make certain 1) it makes sense under the circumstances, 2) is enforcable, and 3) management is ready to fire those that don't comply - everyone who doesn't comply, including the highest selling rep and the one production manager who has all the processes in his head but never wrote anything down.

Otherwise they are asking you to do what can not be done.

Warm regards,

Steve

Steve McElfresh, PhD
Principal
HR Futures

408.605.1870

scottorr · June 2003

If you fire the guy the noncompete is out the window any ways. At that point he can go work for whom ever he wants which would defeat the entire purpose of having him sign it in the first place. So why put yourself through the hastle of trying to replace him. If you haven't required him to sign it for 8 years why create the headache. If he were brand new and this were a condition of employment I would be inclined to agree to rescinding the offer. After he has accepted a position and worked for your company for 8 may I repeat 8 years, you are now going to tell him he can not go to work for your competition or you will fire him so he can.

Don D · June 2003

Scott: Typical non-competes don't cover the current time frame; they're written so as to preclude the employee, who becomes an ex-employee, from then joining the 'competition', or from using such information as was obtained while with one company from being used for his benefit with another, or on his own. And, with that restriction covering a specific period of time, say, one year following his separation. So,if the non-compete is legal and enforceable in your state, it isn't 'out the window anyways'.

scottorr · June 2003

I would say that if you fire the guy, it is not enforceable. If you fire this guy, he gets a job at a competitor and you sue him. I don't think there is a judge or jury that would side with you plus your legal cost would be prohibitive. Most noncompetes that I have read specifically refer to voluntary seperation. That being said, I think this company has the right to terminate this emplyee but they will have to pay unemployment, the cost of replacing an employee (with a company that has just downsized), and I honestly do not think they would be able to enforce the noncompete. Not to mention the rumor mill would be hard at work saying that this is proof that more downsizing is on the way. The person needs to measure what the true cost would be, consult their attorney and then decide. Not make a decision in a huff.

Need Help - ASAP Will not sign non-compete

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