Business Workshop: Noncompetes and fired employees
Share with others:
For decades the conventional wisdom has been that if you fire an employee, you can't enforce any noncompete agreement that the employee signed with the company.
The argument goes that by firing an employee, the company deems that employee's contribution worthless to the business. The employer therefore has little or no need to protect itself from the possibility of the fired employee taking business away or otherwise harming the company.
But recent court decisions are changing that view. Nowadays the fact that an employee was fired without reason may not, in and of itself, invalidate a noncompete covenant. The fact of the firing is one of several factors courts will consider in determining if the noncompete clause is valid.
Other factors include:
• The fired employee's access to the company's confidential and proprietary information
• The fired employee's past agreement to terms that prevent him from soliciting the business of the company's clients.
• If the employee has revealed any confidential information or trade secrets.
• If the employee received a consideration such as a promotion or payment for signing the noncompete agreement.
• The impact of the noncompete covenant on the former employee's ability to earn a living.
The question of enforcing the noncompete contract of a fired employee is moot, however, if the company has not constructed the contract terms properly. The restrictions imposed by a noncompete clause must be reasonably necessary for the protection of the employer. Moreover, the noncompete restrictions must also have reasonable limitations in both how long they last and geographic scope.
-- Brian J. Sommer
Meyer, Unkovic & Scott
First Published February 25, 2013 12:00 am