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bornitz

non-compete question

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Hi,

 

I'm a W2 contractor working for company ABC, who assigned me to support company XYZ on XYZ's account called JKL.

 

Before starting in April 2012, I signed a non-compete clause with the following wording:

 

  1. NON-PERFORMANCE OF SERVICES AND NON-RECRUITMENT. During the term of this Agreement and for 18 months after the end of the employment relationship (whether Employer or Employee initiated the termination), Employee agrees that he/she shall not in any individual or representative capacity (e.g. as a principal, employer, stockholder, partner, agent, consultant, independent contractor, or employee): (a) directly or indirectly provide, solicit or advise another of the opportunity to provide, any services to a client where Employee previously provided services to the client on behalf of Employer or was otherwise introduced through Employer; or directly or indirectly, retain or solicit for Employee or for another party, the services of any of the Employer’s employees or others introduced through Employer. For purposes of this paragraph, “introduced through Employer” means where a client, employee, contractor, other individual came to the attention of Employee in any manner through Employer. "Client" includes any affiliates, customers or clients of the Client.

I expect to be terminated soon due to offshoring of the work. Others on our team have already been let go.

 

Before working for ABC company as a W2 contractor, I was a full time exempt employee of XYZ company for 6 years before being laid off due to offshoring.

 

Am I still required to wait 18 months before trying to find another contract position (let's say for a different contracting agency) supporting XYZ or does the fact that I previously worked for XYZ nullify this non-compete clause since they (ABC) did not initially introduce me to company XYZ?

 

Thanks in advance,

 Bonnie

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Talk to a California employment law attorney. As I recall, California law renders unenforceable nearly all noncompete agreements that are not in connection with the sale of a business. So it may well be that this provision is simply unenforceable, in which case it would not be necessary to try to parse through what that paragraph allows and what it doesn’t. I don't practice in California, however, and cannot say for sure that it is unenforceable in your situation. I think it would be worth a consultation with the employment law, attorney, though if you have an opportunity to go work for XYZ before that 18 months is up. Note that the fee you pay for legal advice on this is generally tax deductible as an employee business expense.

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As I recall, California law renders unenforceable nearly all noncompete agreements that are not in connection with the sale of a business.

 

Correct.

 

Question for the OP:  Does the contract say that it is governed by any particular state's laws?

 

 

The clause may be governed by New Jersey law since that is where the company is located.

 

That may be, but, since the OP lives in CA, enforcing the clause can only occur in CA, and a CA court would refuse to enforce a restraint that violates B&P 16600 regardless of what state's laws govern.

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That may be, but, since the OP lives in CA, enforcing the clause can only occur in CA, and a CA court would refuse to enforce a restraint that violates B&P 16600 regardless of what state's laws govern.

 

That was my thought, too. The company may have drafted the provision to comply with NJ law not realizing that it would not be enforceable against its employees who are in California and would be seeking work in that state. Or the company may have known it would not apply but stuck in the agreement anyway hoping the employee wouldn’t find out it wasn’t enforceable.

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Except for very narrow exceptions which aren't likely to apply here, non-compete clauses in employment contracts are void and unenforceable in California. If you live in California, perform the scope of your employment in California and enter into the employment contract in California, a California court will not allow the employer to make an end run around California law by designating New Jersey as the choice of law for the purposes of disputes or contract interpretation. Moreover, New Jersey requires non-compete clauses to be narrowly tailored and not so restrictive as to create a hardship for the employee. I'd argue that this clause easily fails the test under New Jersey law. If the former employer give you any grief, consult local counsel. 

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Thank you all very much. I appreciate you sharing your insight with me. it puts my mind at ease, but I will certainly contact an attorney if I do find another consulting position with the client and the agency attempts to interfere or cause problems. Thanks!

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bornitz,

 

Courts in general disfavor non compete clauses, especially one with such an extended period (18 months is probably way too long). The likelihood of this clause preventing you from working at XYZ  may be very low.

 

Take a look at the following articles:

 

Non-competition Agreements: Overview

Is Your Non-compete Clause Valid

 

It also won't hurt to get a consultation form an employment attorney in California.  You can search for one using our lawyer directory.

 

The FindLaw.com Directory

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In addition to some of the points made above, here are recent posts regarding non competes in California involving companies headquartered or governed by laws in other states that are good points regarding the exclusion in California.  And why in some cases they ARE valid there... 

 

http://www.carr-mcclellan.com/insights/why-assuming-out-of-state-non-compete-agreements-are-unenforceable-against-california-employees-is-high-risk-behavior/

 

http://www.employmentmattersblog.com/2015/07/can-a-move-to-california-invalidate-a-non-compete/

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Thank you HurryUpnWait. I appreciate those links. I will be cautious. The agency let me go on Monday and I have an interview tomorrow with a company that is completely outside of this agency's grasp. And if someone should contact me about a position with XYZ or JKL, I will make sure that they know about what I signed. These contracting agencies end up with each others staff quite often, so I'm sure that I wouldn't be a first. I just don't want to be the one that gets hauled into court.

 

Thanks again!

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Thank you HurryUpnWait. I appreciate those links. I will be cautious. The agency let me go on Monday and I have an interview tomorrow with a company that is completely outside of this agency's grasp. And if someone should contact me about a position with XYZ or JKL, I will make sure that they know about what I signed. These contracting agencies end up with each others staff quite often, so I'm sure that I wouldn't be a first. I just don't want to be the one that gets hauled into court.

 

Thanks again!

Good luck!

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