May 4, 2016 § 2 Comments
Every now and then a suit is filed in chancery court to enforce a non-compete clause in an employment contract. I have heard cases involving bank employees, employment counselors, and broadcasting sales personnel. There may have been others that I don’t recall right now.
Non-competes are used in the legal profession, although the professional rules would seem to proscribe divulging the kinds of confidential information that those clauses aim to prevent.
Our law requires that they be reasonable in scope, geographical coverage, and time, and the reasonableness is relative to the nature and responsibilities of the position. A three-year prohibition against working as a managing nuclear engineer at a competitor anywhere in Mississippi could well be reasonable, while a three-year prohibition against working as a teller at a competing bank anywhere in Mississippi likely would not.
One of the most interesting non-competes I have heard about involves a fast-food sandwich chain that requires sandwich-makers and delivery drivers not to take a similar job within two years at a competitor within three miles of one of their stores, which means practically nowhere. Most people at that level of the pay scale don’t have the money to fight an injunction in a case like that.
An interesting article by Justin Fox on the Bloomberg site explores how non-competes stifle entrepreneurship and innovation, and how their absence allowed Silicon Valley to thrive at the expense of Boston, which (with its MIT and numerous other universities) had been the early seat of technology advancement.