Noncompete clauses finding challengers
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If it's the best of times, or the worst of times, chances are noncompete clauses are in the conversation.
The clauses, which can bar an employee from working for a competitor after leaving a company, rise in prominence anytime workers start shuffling around.
Rumblings about noncompete clauses were last heard in 2002. The economy was rebounding after the Sept. 11 terrorist attacks, and workers started finding new work.
Today, with unemployment running high, more workers than ever are clocking out for the last time and challenging noncompete clauses. Overall, corporate litigation is expected to go up in the next year: A Lawyers Journal survey earlier this month found 42 percent of corporate counselors anticipate an increase in legal disputes.
Local law firms say the job bust is creating a boom for noncompete cases.
The Cranberry law firm LynchWeis has seen more cases involving noncompete clauses in 2009 than in any of the past seven years.
Noncompete clauses become a hot topic in a cold economy for two reasons. With less money going around, "now companies are going after every dollar," said Daniel Lynch, a partner at LynchWeis.
In flush times, companies are more lenient with wayward employees. But now, every client counts as competitors scrounge for possible revenue.
"The buzz used to be that these clauses weren't enforcable," said Joseph Weis, a partner at the Cranberry firm. "That led to a call for more narrow clauses that are more enforcable."
Noncompete clauses are becoming more important as part of the hiring process. Companies, aware of the unprecedented demand for jobs, can leverage a noncompete clause as part of the negotiating process.
"When you know people are anxious to get a job, you can say, 'There's going to be a noncompete, and it's going to be a tough one,'" said Jim Carroll, an attorney at the Downtown employment law firm Rothman Gordon.
If that causes employees to walk away from an offer, employers can rest assured that layoffs and downsizing are creating many other applicants willing to accept stringent demands, he said.
Advancements in technology have complicated matters for employers, too. Mr. Carroll cited salesmen as an obvious group susceptible to noncompete litigation -- after all, their strongest asset is a cultivated client base. And sales associates can forge connections with more people now than ever before thanks to computer connections. They're not just limited to clients who live around town.
Some unions are seeking government help.
Workers in the radio and broadcast industries, hit like all media outlets by plummeting ad sales and massive layoffs nationwide, are seeking legal protection against binding noncompete clauses.
A bill has just been introduced in the Pennsylvania Senate that would forbid broadcast employers from enforcing a noncompete contract clause against a former employee.
Union members often are forced into another market after termination, which could mean moving as far as 75 miles away to find work, said John Haer, executive director of the American Federation of Television and Radio Artists, Pittsburgh chapter.
"The economic situation exacerbates the problem because there's less mobility, and moving to a new market is a less exciting prospect today," he said. "There aren't many job opportunities."
That's the case everywhere, which leads some to ask: Can't these laid-off employees get a break?
Mr. Carroll said a call for empathy can be used by both sides -- an employee seeking a paycheck, or a company trying to get by in a tough economy.
"Courts have taken a heavier hand in settling before litigation," Mr. Lynch said. "But if an employer wants to be benevolent, there's a business risk that the place becomes a revolving door."
First Published December 13, 2009 12:00 am