Non Compete after a company leaves a market
My employer has recently sent out a memo stating that they are no longer engaging in business in several markets that we were previously conducting business in. All of the employees have non-compete clauses in our contracts. If the company is publicly removing itself from the market will the non-compete clauses hold up if some of the employees want to leave the company and continue working in the markets previously supported by the company?
1 answer | asked Jul 26, 2005 10:28 PM [EST] | applies to Ohio
Answers (1)
You are probably safe competing in a market that your employer abandoned, but....
Non-competes take two levels of analyses. First, read the contract that your employer made you sign. If it prohibits competition in a market that it was in before it abandoned it, then you have a contractual obligation not to compete. If you violate that obligation, you are subject to suit for breach of contract.
The second level of analysis is whether the court will enforce that obligation in the employer's suit. That will turn on whether the employer still has a protectible business interest in keeping you from competing against it. Since your employer abandoned that market, it is hard to see how it would have any continuing interest in protecting that market. However, this level of analysis is very fact driven. That is, every case is different. Therefore, it is not possible to say whether you would be able to compete or not.
My suggestion is that you approach the employer with your proposal to go into that market. The employer will have one of three responses. First, your employer might say "okay." In that case, wrap up your employment responsibly and go off and seek your fortune.
Second, your employer might point to a legitimate business interest that it needs to protect. In that case, the non-compete may be enforceable.
The third answer might be that "I can't afford to lose you." This is not a legitimate reason for enforcing a non-compete. However, you would probably be headed for litigation. In that case, call me at 330.665.5445 and we will figure out a strategy for breaking your non-compete.
Best,
Neil Klingshirn.
posted by Neil Klingshirn | Jul 27, 2005 9:44 PM [EST]
Non-competes take two levels of analyses. First, read the contract that your employer made you sign. If it prohibits competition in a market that it was in before it abandoned it, then you have a contractual obligation not to compete. If you violate that obligation, you are subject to suit for breach of contract.
The second level of analysis is whether the court will enforce that obligation in the employer's suit. That will turn on whether the employer still has a protectible business interest in keeping you from competing against it. Since your employer abandoned that market, it is hard to see how it would have any continuing interest in protecting that market. However, this level of analysis is very fact driven. That is, every case is different. Therefore, it is not possible to say whether you would be able to compete or not.
My suggestion is that you approach the employer with your proposal to go into that market. The employer will have one of three responses. First, your employer might say "okay." In that case, wrap up your employment responsibly and go off and seek your fortune.
Second, your employer might point to a legitimate business interest that it needs to protect. In that case, the non-compete may be enforceable.
The third answer might be that "I can't afford to lose you." This is not a legitimate reason for enforcing a non-compete. However, you would probably be headed for litigation. In that case, call me at 330.665.5445 and we will figure out a strategy for breaking your non-compete.
Best,
Neil Klingshirn.
posted by Neil Klingshirn | Jul 27, 2005 9:44 PM [EST]
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