View Full Version : non compete agreement
01-30-2001, 12:36 PM
I have A friend who sold his service biz.
Theres a non compete agreement for 7 years.
I have heard this will hold up in court.
If he wants to start a biz in the same industry.
Within a 75 mile raddious of the main city.
My question for all you armchair laywers. LOL.
Can he work for someone provided he does not,
Go after any past clients?
Thanks in advance. Kyle
01-30-2001, 12:48 PM
Kyle, from my understanding (law varies from state to state)
you cannot stop anyone in HIS field from opening up a competing business in the lawncare business. The non compete usually only can be enforced to keep him away from the existing customer base he sold. So he can't go after his old customer base, but can compete or solicit new accounts in his area. That's my understanding.
01-30-2001, 12:51 PM
I forgot to mention. This is Illinois.
My friend does not want to start A biz.
Just work for others in same industry.
01-30-2001, 12:59 PM
Oh, If the non compete was drawn up right, then he would not be able to share trade secrets with his new employer as well so that they will not go after your business if he divulges clients rates, etc..
01-30-2001, 01:37 PM
it all depends on how the non-compete was worded i have made sure in the past when buying someone out that the legal terminology was in place to not only keep him from prior customers but to completely stay out of the industry. now of course he can participate in the field within a mile radius but as long as its not my market who cares
01-30-2001, 02:03 PM
Sometimes non compete agreements on the sale of a business means the former owner can't get back into the market in that area. They can work for others, as long as they don't go after former clients.
Most business that are sold in all types usually have this. This means the owner can't get out and then use his name to get back into business. This isn't fair to the new owners. It eats into their market base. Its a stipulation for the sale.
02-02-2001, 12:20 AM
no compete clauses mean whatever is in the writings....most of the time you can work for someone eles with a problem unless you step over the line of work to trying to prurposly stutting someone down.....i had signed a no compete clause in the past before i changed careers..it is also not bad look you sold your bizz and should have made good money doing it with the knowlge of what you wanted to do next.....if he sold a lawn service he can always get into sprinklers and landscaping and still be legal ..this can be enforced,,,,was the no compete directed to the exsitsting service or the green industry all together?
02-02-2001, 02:06 AM
First of all, I'll tell you right now that I seriously doubt a non-compete that specified 75 miles would be enforceable unless the company actually had an effective radius of 75 miles. My attorney tells me that in the case of non-compete agreements, courts will either uphold or make the contract void based on a reasonableness standard. He went on to explain that if the court feels the company was being too greedy in the contract (e.g. specifying too large of an area or too many years) they would deem it as unreasonable and the entire contract, or a part of it would be thrown out.
I think unless it was a really big company 75 miles is a big stretch and probably wouldn't hold up. Furthermore, 7 years a little much too. My attorney advised 3 years max for us. I mean, think about it. Is there really a threat from an ex employee who starts a business over 3 years later???
Again, like Mike said, it does vary a little from state to state so you really should talk to an attorney for the best advice.
But the real issue in this case seems to involve the ex employee working for another company, not going into business for himself.
No agreement can keep him from working for another company. That isn't legal. So yes, your friend can go work for whomever he chooses.
But if it was a well written non-compete agreement it should have wording that prevents your friend from sharing trade secrets and confidential client information with the new company. So he'll want to watch what he tells the new company about the old one.
In reality, there is another serious factor to consider. Non-compete agreements, however enforceable, are usually not worth a company's time and money to try to enforce. The contract's main threat is a mental one. That is, the employee THINKS their bound to a contract and acts accordingly. In reality, he could probably break it and it wouldn't be worth it for the other party to pursue the case.
02-02-2001, 02:22 AM
3 guys I know real well from my retirement consulting days had a judge uphold their non compete agreement. These 3 guys were CEO's of companies that were owned by a holding company. They left and formed a partnership. Former employer sued them and won. After the time period expired, he then sued them for $10 Mil. Lucky for them, they guy had a brain anurisym that let go last week and he died. Suit is over. I still have 1st hand knowledge of all this, my girlfriend is a CPA working for these guys.
I agree that not all will be enforced, but you never know what judge you might get.
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