Parent Co. Non-Compete Applicable to Wholey Owned Sub?
My former employer, Company A, is a wholly owned subsidiary of Company B.
My former employer is a software company that sells it's applications to the financial industry. I worked in business development.
My former employer requested that I sign a non-compete. This non-compete was written from the perspective of it’s parent, Company B, with no mention of my former employer, Company A. The non-compete also defined the Company B as a telecommunications and internet service provider. All references of the contract point to Company B and it’s definition as such.
I have since moved to a new employer and am now working for what clearly is a competitor of Company A. However, they are not a telecommunications and internet service provider. They are a software company that sells it’s applications to the financial community.
I am expecting that once my former employer finds out where I am working they sue. At which point I will need an experienced lawyer to defend.
Based on my description of the contract and situation, does it seem logical that the contract is not applicable?
In such a scenario, do you think the courts would throw it out before costing me a fortune to fight?
I expect that a lawsuit is inevitable. Peace of mind and a good lawyer in waiting until then is what I am looking for at this point.
Thank you in advance for your assistance.
Answers (1)
You will sometimes run across a court decision which says the court will not put form over substance. That type of thought applies here. In other words, I doubt that a court will throw out an employment agreement merely because it is in the name of the parent company rather than the subsidiary.
But that does not mean you are out of luck. The law still remains that in New York, court dislike non-compete provisions in employment. In other words, whether in the name of Company A or Company B, the likelihood is that the non-compete is not enforceable.
posted by David M. Lira | Apr 16, 2003 4:19 PM [EST]
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