Non-Compete Agreement without a Signature

A Non-Compete Agreement without the Employee's Signature

In a way, employers don't need non-compete agreements, if all the employer wants to do is protect legitimate business interests. The one area that I can think of where a non-compete agreement might actually afford employers additional protection not otherwise available is with professionals, such as medical doctors and accountants, even lawyers.

A legitimate business interest is something like proprietary information. An employee is simply not allowed to steal proprietary information, especially to give or sell it to competitors, or to use it in setting up a competing business. The employer does not need a non-compete agreement to protect its proprietary information.

Employers seem to be increasingly using non-compete agreements, often for at best questionable purposes. Non-competes may serve to lock in employees with the risk of litigation. Non-competes, in other words, are creating a new type of feudal system in which employers hope to hold employees captive, and to protect themselves from competitive market forces.

But as I said, sometimes, employers have a legitimate reason for having certain employees sign non-compete agreements. And, sometimes, an employer needs a non-compete agreement inorder to protect interests that might not otherwise be protected.

But, the employers would get the benefit of a non-compete agreement only if the employers can show that the employee voluntarily entered into the agreement.

The key question is whether the employee agreed to be bound by the terms of the agreement. That agreement to be bound might be proven in a number of ways, but, by far, the easiest and mostly widely accepted means of demonstrating agreement to be bound to the terms of an contract is to simply get the person to sign the contract.

So, one way to show that an employee entered into a non-compte agreement (not necessarily voluntarily) is having the employee's signature on the agreement.

Now, in my practice, I have seen instances where the employee has failed to sign the non-compete agreement. That will not always stop an employer.

I have seen instances where a supervisor signs for the employee. The problem with this is for the employer is that, because the employee has not signed the agreement, there can be no assumption that the employee agreed to be bound by the terms of the non-compete. If the employer has no other way of showing the employee agreed to be bound, the employer would not be entitled to the protection that the non-compete might have otherwise provided.

But now we have to deal with a basic truth of the system of justice in the United States. The fact is anyone can sue anyone else at any time for any reason. So, an employer can sue an employee even on a non-compete agreement that the employee did not sign. The employer in all likelihood would lose this lawsuit, but it could nonetheless still bring the lawsuit.

After the employee wins a lawsuit based on an agreement the employee never signed, the employee might, but might not, be able to get sanctions imposed against the employer for bringing a frivolous case. Just note that court are very reluctant to impose sanctions. Nonetheless, an employer is taking a big risk suing on a non-compete the employee denies ever signing.

posted by David M. Lira  |  Jun 9, 2006 1:32 PM [EST]