Non-Compete Agreements for non-sales or executive employees
Question about non-sales or executive non-compete agreements:
My position is as a Senior Manager (non-department head and not considered part of the company management team) of Human Resources. The industry that I work in is Clinical Research. I have signed a non-compete agreement in exchange for stock options (however, my company is not yet publicly traded, and I am aware of no timeframe to do so). The language of my non-compete contains "For a period of one (1) year following the date that Participant ceases to be employed by Company for any reason, Participant, without the express prior written consent of the Company, will not compete in any way with the Company, directly or indirectly, and will not consult with, accept employment with, or have any interest in any Business, whether alone or as an Interested Person, which engages in the performance of or provides the same or similar services as provided by the Company to any individual or entity or which competes with the Company, directly or indirectly, in any aspect of the business of the Company within One Hundred (100) miles of Philadelphia, Pennsylvania. Participant specifically agrees to the above geographic restriction since the principal means by which the Company business is conducted is through email, telephonic and mail communications". I have been approached by another, smaller, Clinical Research firm to perform the same duties that I perform here, except at a department head level. My current employer market's itself as being able to perform any service within the realm of clinical research; however, they have not actually performed all of those services. The smaller firm is more focused and provides services to clients primarily in the areas that my current employer does not, but does have the capability to do so. As my position is in Human Resources, a common position within any firm regardless of industry, would the non-compete be enforceable?
Answers (1)
Before I respond to your inquiry, I must state that we have not spoken, I have not reviewed the relevant documents and facts, and I do not represent you. Therefore, my discussion below is not a legal opinion, but is informational only. Finally, my discussion applies only to issues to which Pennsylvania or Federal law apply, unless otherwise specified.
That being said, there is a good chance that the non-compete agreement is not enforcible. Your focus on both the fact that your employer is not currently involved in the areas that your prospective employer is involved in, as well as the fact that you are in a non-sales, non-executive position is correct.
In Pennsylvania, non-compete agreements must be reasonable in their time limit, geographic limit, and must protect a 'legitimate business interest.' The one-year, 100-mile limits are likely to be held reasonable by the courts. The real question is whether preventing you from working for a competitor protects a legitimate business interest.
The courts have held that employers do not have a 'legitimate business interest' in protecting themselves from general competition in the marketplace. Instead, employers have a 'legitimate business interest' in protecting specific aspects of their businees: the sales relationships their employees have built; their confidential customer, business, marketing or product information; their vendor and employee relationships, etc.
As an HR Manger, you may or may not be involved with a protectible, legitimate business interest. It is likely, however, that you are not. While I am familiar with the clinical research industry, this determination is a detailed, fact-based determination that I cannot definitively make without going over the details of your employment and your employer's business.
The next question is whether you would have to return the stock options you received if the contract is not binding. Again, without reviewing the document, I cannot make any such determination.
If you would like to discuss this matter further, please feel free to contact me at the below address(es) or number.
/Christopher E. Ezold/
Nancy O'Mara Ezold, P.C.
401 City Line Avenue,
Suite 904
Bala Cynwyd, PA 19004
(610) 660-5585
Cezold@Ezoldlaw.com
posted by Christopher Ezold | Mar 17, 2005 09:08 AM [EST]
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