Is this employment restriction valid?

Question

My friend works as a consultant, (not full time staff) for an engineering company. At the time of being employed by them, he signed an agreement stating that upon leaving employment with them, he wouldn't work for any of the competitors in the industry. At the time of signing, they sent him a contract without any signatures, and had him mail it back with his signature only. Does the fact that at the time of his signing there were no signatures present on the contract invalidate it? (he has been working there for about 9 months now). Even if this contract is valid, what are the chances that the company could successfully sue him in court, in the event that he leaves and immediately goes to a competitor?

Answer 1

The contract clearly states that your friend can not work for any competitor in the industry, it is clear what he was signing at the time he signed it. As a court case you loose. The company not only will sue your friend, they will sue the new employer and there is a good chance that they will get $200,000 when they win.

The company, probably have a lawyer that handle this type of law suite for them for $50,000 if they win. This way their competitor is tied up with a law suite and they get to run off with the business.

The wises things for your friend to do is work for a company directly on their staff on a 2-3 year contract, then go to the competitor when the contract is over.

Answer 2

Really depends on the exact terms of the contract. First thing is to determine whether there is in fact a contract, or a specific "offer" and "acceptance" of the contract by both parties. If not, this could invalidate the contract outright.

With respect to non-compete covenants, these are very common in many contracts. The key issue is whether it restricts your friends ability to find employment anywhere. If his skill is something that is common in engineering firms then the contract is more than likely to broad and will not be enforceable.

For example, let's say he is a carpenter working for a construction company who has the same clause as the one your friend has. He later quits. By the nature of what he does and the fact that he will most likely try to find a job with another contractor, the non compete clause will not apply for it is too broad and will severely impact his livelihood and ability to get income. I've added a website below that may help in answering additional questions.

Answer 3

His signing of the contract signifies his agreement with the terms. He would normally have to sign it first, even if it was done in person rather than through the mail.

If his employer didn't know who he was working for after his term with them expired, he would probably be O.K., but but it depends on how badly they are interested in protecting their corporate secrets.

If he is seriously interested in breaking the contract, he needs to get a copy to his lawyer with a statement of his intent, so they can look for an escape.

Typically there is a duration (3 years for instance) after which the terminated employee is free to work fo whomever he or she chooses. Your friend would then need to find employment outside that industry for the three year period between when he completes work with his current employer, and when he can work for a competitor.

Since employmemt is typically a mutual benefit agreement, EITHER party is free to terminate his direct employment, but the no compete clause will still apply for whatever specified duration is stated.

A possible loophole would be for your friend to become employed by a subcontactor or employment service who was his employer, and then have him subcontracted out to the competetor.

It could be possible for your friend to incorporate and be the CEO as well as his own employee. As an L.L.C. he could then be paid through a federal tax-ID rather than his S.S.N. and use that as a work-around. Hardly seems like it is worth the effort in my opinion. Expensive and tie consuming, and it all depends on the contract and the opportunities and marketable skills your friend really has.

Most corporations know the games and thus the contract. It may be air-tight, but only the lawyers and courts will know that.

Answer 4

the non-competittve paragraph is legitimate - but its usually restricted to 1 or 2 years at the most. After all engineers do need to work and keeping them from their livelihoods is not good busines practice.

If there is no time limit on the contract - find out how long the restriction is. If its for more than 2 years, then I would be suspicious and probably not want to work for them.

Answer 5

It's very common and known as a non-compete agreement. Many sales people have to sign such an agreement. The purpose is to protect the company so when the person leaves, they do not take their clients or whatever with them--and to protect intellectual porperty.

I would say it is very defensible in court, and if your friend didn't agree to the terms of the agreement, he should have sought employment elsewhere.

Answer 6

The contract is valid - the chances of successful legal action would depend on the circumstances of departure and reemployment. If he creates unique work for them, they should copyright it to protect their interests instead of depending on the "no compete" clause.

Answer 7

Any contract can be broken but it's best not to enter into what you don't want.