WFJ Presents: What Every Employee Should Know About Noncompetes: Part 3 – Options if you “Want Out”
Employees are often asked to sign noncompete agreements that limit the employee’s legal right to work for other employers or for themselves during and after their employment.
This is the third part of a three part blog about noncompetes. The first part discussed the enforceability of noncompetes. The second part discussed considerations and negotiation tactics when an employee is asked to sign a noncompete. This third part discusses considerations and options when an employee has already signed a non-compete and they “want out” of it.
Your Options Include:
1. Abiding by the terms of the noncompete.
2. Negotiating a written release of the non-compete. This often takes the form of a “buy-out” of the noncompete. Your employer has no obligation to agree to release you from the noncompete for any price. It is helpful in securing the release if you can argue to the employer that the noncompete may not or would likely not be enforceable if litigated.
3. Bringing a lawsuit for declaratory judgment seeking to have the noncompete agreement declared unenforceable or (in some states) to modify it to more reasonable terms. If successful, after the litigation, you can pursue other competing opportunities without risk. This can be costly and time-consuming.
4. Consider involving your new employer. You can ask a potential new employer to assist you in paying for this buy-out if the new employer wants you badly enough. Also, the new employer could agree to indemnify you if the former employer pursues action against you in exchange for agreeing to work for the new employer. An indemnity agreement basically would mean that your new employer would agree to defend you and pay out any damages from a claim brought against you by your old employer.
5. Breaking the terms of the noncompete. This is typically not an option that I recommend. There is enormous risk in breaking the terms of a noncompete. You could get sued and end up being ordered to not work at your new job and to pay money damages, including your employer’s lost business and attorney’s fees. In some cases, you may pay the liquidated damages clause in your noncompete. Your new employer could also get sued for tortious interference with contract.
This blog is for general information purposes only and is not legal advice. If you have already signed a noncompete and want to get out of it, consult an attorney.
Attorneys Meridith J.O. Socha and Kammey M.K. Mahowald