I came across this case and thought it was very interesting and one which you could benefit from. Not too many people place a lot of thought into signing a noncompete agreement, but it is crucial for all individuals looking to get a job to pay attention to such a clause. It is crucial for an employer to ensure an employee signs a new noncompete agreement, even after they are re-hired by the same company but for a different position. Otherwise, there is a high likely chance that the employer, upon the employee’s termination, just allowed their ex-employee to work for a competitor.
In this case, a Plaintiff Employer filed a motion for a temporary restraining order (TRO) against the Defendant, a former employee of the Plaintiff, seeking to enforce a confidentiality and noncompete agreement. To give you a little context, the Defendant started working for the Plaintiff, a pharmaceutical company, in 2015. Thereafter, the Defendant was laid off of work for some time, but fortunately was rehired by the Plaintiff on December 7, 2016. During the process of being rehired, the Plaintiff prompted the Defendant to sign a second confidentiality and noncompete agreement. The Defendant signed such agreements.
Then on June 20, 2018, the Plaintiff sent the Defendant a letter informing him of the termination of his employment as his position was being eliminated as part of a “realignment of [the Plaintiff’s] business”.
The Defendant then applied for another vacant position at the same Plaintiff company and, after an interview, was awarded the job. The previous position was set to expire on August 3, 2018 while the new position was to start on August 6, 2018. Upon starting his new position with the Plaintiff, no new noncompete agreement was required to be signed.
About a year and a half later, on January 6, 2020, the Defendant resigned from his position. Soon after, the Defendant moved on to work for a competitor of the Plaintiff. Upon hearing this news, the Plaintiff sought a TRO against the Defendant.
The noncompete agreement specifically prohibited the Defendant from working for a competitor in certain positions for a year after the end of his employment with the Plaintiff and from ever disclosing any confidential information. The Plaintiff argued that the Defendant was never laid off in 2018, but rather, “transferred positions within the company”. The Court found no merit in this argument.
The U.S. District Court found in favor of the Defendant and denied the Plaintiff’s motion for a TRO because it found that the Plaintiff, “Could not show a likelihood of success on the merits”. The court further found that the Defendant was no longer bound by the noncompete portion of the agreement because, “Those provisions expired 12 months after the termination of the Defendant’s employment on August 3, 2018 and the [Plaintiff] rehired the Defendant on August 6, 2018 without having him sign a new noncompete agreement.
The Plaintiff appealed this order; however, the Appeals Court affirmed the lower court’s decision stating, “We see no abuse of discretion in the district court’s finding that [the Plaintiff] was not likely to succeed on the merits. Nor do we find any abuse of discretion in its decision not to analyze the remaining factors in the test for a preliminary injunction before denying the motion, particularly because [the Plaintiff’s] likelihood of success is so low”. (Referenced MA Lawyer’s Weekly, V.49, No. 28).
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Do you Agree with the Court’s Decision? Comment Down Below!
Yes, I agree with the courts decision here. The defendant had a noncompete but was then terminated. He was then interviewed for another position and rehired. The company should have had him sign another non compete when they rehired him as the noncompete he did sign ended when he was terminated from his former position with the company.-C. MacGilvray
ReplyDeleteI agree with you Cathy! Those are very good points to bring up, and exactly what the court based its decision on!
DeleteHello MSL community!
ReplyDeleteI do agree with the Court's decision. Going off of the facts, the argument the plaintiff had was weak and I agree with the court that it had no merit.
This past summer I was fortunate enough to be able to take the drafting contracts class that MSL offers. I was able to get more exposure with a noncompete clause by having to draft an employment contract based off of a fact pattern. I found it interesting because a court will take into account the geographic area, the competition, how long the contract will last for, and the amount of intimate knowledge the employee has. If the noncompete agreement is overboard and not reasonable, the court will not enforce it.
I look forward to reading other student's comments about this interesting blog post!
Thank you for sharing what you learned in your Drafting Contracts class! It's interesting to know how courts will take into the amount of intimate knowledge the employee knows. I thought a noncompete agreement was standard for every employee of a company, but I guess it varies depending on the position you have at the company...for example a CEO v. sales representative. Thanks for sharing! I'm sure you've enlightened many students!
DeleteA noncompete agreement can't last forever! If the employer really wanted the employee to abide by the rules so to speak as it relates to confidential information or clientele well they failed to in this case by not having it renewed. People have to work. Placing this injunction could be burdensome on some individuals. The agreement was reasonable at the onset, but having the employee sign the contract again seems unreasonable as there was no grounds that he/she would be a risk to employ. As an employer maybe extending the terms would be binding after they terminate a person, however noncompete agreements that last longer than two or three years might not be enforced by the court.
ReplyDeleteThanks for sharing some thought-provoking points! Yes, to the employer it may seem unreasonable to have the employee sign another noncompete when he's been with the same company, but the court thinks otherwise! Noncompetes can be tricky, it's imperative for employees and employers to know when to sign one, the requirements of such an agreement, and when it terminates to avoid disputes like this.
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