My situation

Does anyone know if a non compete covenant can be initiated between an employer and it’s client without the knowledge of there employees.  I am involved in this situation at the present time.  I was laid off in December of 2009 and seeked employment with one of my past employers clients.  They are not a competitor.  I attained employment with the client but was told that after reviewing their service contract that they could not hire me for 12 months.  If they were to hire me, they would forfeit $4000.00.  Something doesn’t sound right!

2 replies on “My situation”

  1. That seems strange. A non-compete is supposed to be a contract, and I don’t see how you can be bound without all the usual things: offer, acceptance, consideration and all that.

  2. Coincidentally, one of our supporters brought this 2007 CA case to our attention, The case involves a contract between a staffing agency and a client. Below are comments by one of the attorneys who are helping us with the noncompete legislation, copied with his permission. Please note that these comments are *not* legal advice. I encourage anyone with questions about his/her own situation to consult an employment lawyer.

    **Begin comments by Russell Beck (Foley & Lardner)**

    I have not (yet – I will) read the case [i.e., –cbh], but based on the post, it sounds like an interesting case for Massachusetts more than California. The result is not a surprise under California’s noncomepete statute (Business & Professionals Code 16600) which, as you know, has an outright ban on noncompetes. The language is instructive: “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” The policy underlying that statute is open competition and employee mobility. In 2008, the California Supreme Court issued the seminal decision, Edwards v. Arthur Andersen, which basically said, “When the statute says ‘every contract,’ it means it.” The case that the article relies on is from 2007. I suspect that that same case would come out the same way now – but without reference to the three potential exceptions.

    As for Massachusetts, I don’t think I’ve ever seen a case like this. The closest thing is a no-hire agreement, to which Massachusetts applies the same analysis (albeit with limited rigor) as applied to traditional noncompetes. I suppose that the battleground will be over the legitimate business interest, which, for these types of agreements, are expanded beyond trade secrets, confidential information, and goodwill – thereby making it that much harder to challenge them. So, while it will be fact-dependent, I think it would be a hard contract to overturn in Massachusetts.

    Under the statute, a contract like this would be unaffected (see section m).

    **End comments by Russell Beck**

    I believe that Russell is saying that our bill would not affect such contracts. We limited the scope of our bill with Section m (quoted below from the latest draft, see (However, there may be other provisions of MA law which may be applicable to a particular situation. I encourage anyone with questions about a specific situation to consult an employment lawyer.)

    **From the draft of our bill:**

    (m) This section shall not apply to or alter existing law concerning: (1) covenants not to solicit employees of the employer; (2) covenants not to solicit or transact business with customers of the employer; (3) restrictive covenants made in connection with the sale of a business or the assets of a business; (4) agreements by which an employee agrees to not reapply to the same employer after termination of employment; or (5) the payment of wages.

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