Questions regarding Non-Compete in a contract

[Aaron0502]

Jurisdiction

Minnesota

Hello,

I have a questions regarding a non-compete contract that my wife has with her former employer.

Her former employer is a small family owned business that does oil and fuel transportation; the business is being ran by the 2 sons of the owner and they are some of the most arrogant people you could imagine working for. She was fired from this place because they found out that she was looking for another place to work. Fortunately she was hired by the place that she applied for and has been happily working there for about 3 months. The place that she went to is a natural gas company.

Now one of her former coworker (and her friend) is leaving the bad family company to work for the same company that my wife now works at. In her friends contract that they had her sign she must give them a 4 week notice before leaving the company which she is currently going through. The first 2 weeks of her 4 weeks have been hell to her, they say that going to the Natural Gas company is a breach of the non-compete and have been threatening legal action. They have also made her cancel her vacation that she has had planned for months. (It doesn't take a genius to understand why people want to leave this company) The oil and fuel transportation company does not deal in any Natural gas or propane directly but when somebody calls them asking for propane they forward them to one of their clients that does transport propane. So basically they are saying that since the oil company delivers diesel fuel to the propane company for their delivery trucks and forwards customers to them they would lose business if her friend would go work for the Natural gas company. The oil comany also does a little transportation that they could say that a natural gas company could take business away from. Both my wife and my wife's friend work in accounting and billing and have nothing to do with sales and have no idea who the propanes's customers even are. Now to make my wife's friends last 2 weeks even worse they are trying to get her to sign another contract that essential says "Yes I understand that by working for this natural gas company I am violating the non-compete, but by signing this the oil company is giving their blessing to work for the natural gas company but cannot have any contact with the propane customers for 2 years." They are giving this contract to her in the mail friday and it becomes void unless signed by Monday so she does not get a chance to have a lawyer take a look at it.

Does my wife or my wife's friend need to worry about anything? Should my wife's friend say that she will not sign the contract because they are trying to screw her over?

Here is some of the working of the contract that we are concerned with:

In consideration for the payment described above and for the mutual promises and covenants contained herin, and for such other and further consideration the receipt and sufficiency for which is acknowledged, the employee agrees that during the term of the employee's employment with the company, and for a period of one year following the employee's termination, for whatever reason, from employment with the company, the employee shall not, directly or indirectly, for him or herself or as an officer, director, manager, employee, partner or consultant of, or otherwise on behalf of any person or entity, accept any employment or otherwise become affiliated with any petroleum or lubrication provider or distributor located in or doing business in the state of minnesota or any state with which minnesota shares a border.

The employee further understands that in the event of a violation of this confidentiality and non-compete agreement, the employee shall be responsible for all reasonable costs and disbursements the company incurs in pursuing the enforcement of this agreement, including, but not limited to, reasonable attorney's fees.

The company has no legitimate interest in enforcing the non-compete and can not lose any business by having them work at the natural gas company but they are petty people that routinely threaten lawsuits.

Any recommendations would be much appreciated.

Thanks

 

[adjusterjack]

In consideration for the payment described above

This is simple. If she wants the "payment" she signs. If she can live without the "payment" she doesn't sign. And since she would be stupid to sign it would appear that her options are clear.

 

[Aaron0502]

This is simple. If she wants the "payment" she signs. If she can live without the "payment" she doesn't sign. And since she would be stupid to sign it would appear that her options are clear.

I am sorry the way that I have the thread laid out was confusing, the two paragraphs regarding the non-compete contract are the contract that both my wife and her friend had to sign to employed by the oil company.

 

[army judge]

Does my wife or my wife's friend need to worry about anything?

Maybe.

People worry about many things.

They are giving this contract to her in the mail friday and it becomes void unless signed by Monday so she does not get a chance to have a lawyer take a look at it.

She might ask the company for an additional 48 hours to have the contract reviewed by HER attorney.

Taking advice on IMPORTANT matters from STRANGERS can be costly in a myriad of ways.

 

[Michael Wechsler]

Your wife's friend should be concerned. This appears to be a separate settlement agreement and something different than the non-compete agreement she originally signed. Most non-compete agreements are not enforceable for longer than 1 year, especially for lower level employees. The wording appears broad as well and is not surprising since the company's lawyers drafted it. I don't know how the new employer might feel about the conditions contained in this agreement and this ultimatum where your wife is not given a reasonable chance for legal review. I am guessing there is probably a provision in the terms which may state that she has had an opportunity. But that's not the issue. This appears to be a separate compensation agreement.

First question: I have to wonder why the former employer didn't enforce this allegedly enforceable agreement against other former employees such as your wife.

Second, unless the compensation is substantial enough that there isn't concern if the new employer decides to go in another direction, this settlement agreement may not be worth signing.It could certainly be a scare tactic in the hope of getting a firm agreement rather than consider the cost and likelihood of a failure to win in court trying to enforce a non-compete agreement.

We certainly cannot give you the "right" answer but only perspective. Good luck to your wife's friend today.

 

[Aaron0502]

Your wife's friend should be concerned. This appears to be a separate settlement agreement and something different than the non-compete agreement she originally signed. Most non-compete agreements are not enforceable for longer than 1 year, especially for lower level employees. The wording appears broad as well and is not surprising since the company's lawyers drafted it. I don't know how the new employer might feel about the conditions contained in this agreement and this ultimatum where your wife is not given a reasonable chance for legal review. I am guessing there is probably a provision in the terms which may state that she has had an opportunity. But that's not the issue. This appears to be a separate compensation agreement.

First question: I have to wonder why the former employer didn't enforce this allegedly enforceable agreement against other former employees such as your wife.

Second, unless the compensation is substantial enough that there isn't concern if the new employer decides to go in another direction, this settlement agreement may not be worth signing.It could certainly be a scare tactic in the hope of getting a firm agreement rather than consider the cost and likelihood of a failure to win in court trying to enforce a non-compete agreement.

We certainly cannot give you the "right" answer but only perspective. Good luck to your wife's friend today.

Hello Michael, thank you very much for your response. It appears that they are also threatening my wife now with a lawsuit and trying to get both of them to sign this new broad agreement.

To answer the first questions they may claim that they were unaware that my wife was working at this new company however as soon as her friend mention that she was working for the company they had mentioned working with my wife so they knew all along; they are just upset that people are leaving their company.

We don't have any intent on signing the new agreement as we feel that it is too broad and can potentially set us up for more lawsuits (some of my wifes close relatives are customers of the company, do they expect her to have not contact with them?).

I am planning on talking with a employment law firm tomorrow to go over what it is going to take to get them off of our backs for good. It's just really annoying that they are making us do this out of spite.

Attached is the original agreement and the letter that they just sent us in the mail on Friday.

 

[Michael Wechsler]

So if I understand correctly, the company had 1 year non-compete agreement with its employees. But the follow up letter / settlement agreement expiring today, after threatening you with litigation, includes a provision for a TWO year prohibition? Unless they are offering a princely sum of money, this seems preposterous. It was also sent via regular mail? How did they confirm you received it?

 

[Aaron0502]

Preposterous is the perfect word for this entire

So if I understand correctly, the company had 1 year non-compete agreement with its employees. But the follow up letter / settlement agreement expiring today, after threatening you with litigation, includes a provision for a TWO year prohibition? Unless they are offering a princely sum of money, this seems preposterous. It was also sent via regular mail? How did they confirm you received it?

Preposterous is the perfect word for this entire situation, like i said the owners of this company are some of the most arrogant people you could possibly imagine.

They are offering no sum of money or anything for signing the 2 year agreement except for their "Blessing" to work for the new natural gas company.

Yes it was sent regular mail I am assuming so that it gives us as little time as possible to give them a response and they have no way of knowing if we received it.

This whole thing feels like a power trip for them, we are not violating the terms because the natural gas company is neither a petroleum or lubrication supplier not do they compete with the propane company they are trying to loop into this. (On a side note it is highly unlikely that the oil company has even informed the propane company that they are using their name in this manner or do we have any idea whatsoever who their customers are)

 

[Michael Wechsler]

The following is not legal advice, just some observations looking through what was sent.

I don't see any specific place where they identify how and why you are in violation of their non-compete and confidentiality agreement. They simply conclude that you are in violation. It might reflect that they may not believe or aren't sure that you are in violation. It could also be sloppy or lazy writing (in my opinion.) I can only speak about how I might handle such a letter and I would point out the violation if I had a strong case in order to convince you to settle.

As you pointed out, a company selling propane is not a product equivalent of "petroleum or lubricant." I'm not an expert here, I don't know the companies involved, but if it's a utility such as a gas company which supplies to our buildings they may be different entities. The letter calls the other entity a "competitor" for which you don't appear to be limited from joining provided it isn't within the parameters stated above. As a general rule, courts interpret restrictions on employment narrowly and that should work in your favor with respect to the boundaries of limitation.

The letter isn't an agreement. It's an inquiry to determine whether you'll agree. Perhaps they are fishing for your level of concession. If you would be inclined to go forward, they would have to send you another agreement which has all their terms written out. I don't see any statement of a release of all liability for you either.

The law firm also states they will "explore all of their legal options" and does not state that they believe they have any legal claims against you. Again, I can't speak to style but if I wanted to convince someone that I had a strong case I would let them know what is coming. I have seen weaker letters attempt to let the reader be afraid of the unknown.

Most non-compete agreements are only enforceable up to one year. What is very unusual to me is that here they want two, which is usually cases where the employee would have access to very sensitive data. And more unusual is that they are asking for an additional year after employment has been completed, as if the fear of a lawsuit should be so strong that you should be inclined to restrict yourself for another year. And there is no compensation for this additional restriction, only that the supposed repercussions of your breach reflect substantial consideration in return for this additional imposition.

Obviously I cannot advise you on what to do. Having a proper legal consultation with an attorney and having your retained attorney address the law firm's contentions is obviously the optimal way to go. Whether you choose to retain an attorney is obviously up to you. Best of luck to your wife and her friend.

 

[Aaron0502]

The following is not legal advice, just some observations looking through what was sent.

I don't see any specific place where they identify how and why you are in violation of their non-compete and confidentiality agreement. They simply conclude that you are in violation. It might reflect that they may not believe or aren't sure that you are in violation. It could also be sloppy or lazy writing (in my opinion.) I can only speak about how I might handle such a letter and I would point out the violation if I had a strong case in order to convince you to settle.

As you pointed out, a company selling propane is not a product equivalent of "petroleum or lubricant." I'm not an expert here, I don't know the companies involved, but if it's a utility such as a gas company which supplies to our buildings they may be different entities. The letter calls the other entity a "competitor" for which you don't appear to be limited from joining provided it isn't within the parameters stated above. As a general rule, courts interpret restrictions on employment narrowly and that should work in your favor with respect to the boundaries of limitation.

The letter isn't an agreement. It's an inquiry to determine whether you'll agree. Perhaps they are fishing for your level of concession. If you would be inclined to go forward, they would have to send you another agreement which has all their terms written out. I don't see any statement of a release of all liability for you either.

The law firm also states they will "explore all of their legal options" and does not state that they believe they have any legal claims against you. Again, I can't speak to style but if I wanted to convince someone that I had a strong case I would let them know what is coming. I have seen weaker letters attempt to let the reader be afraid of the unknown.

Most non-compete agreements are only enforceable up to one year. What is very unusual to me is that here they want two, which is usually cases where the employee would have access to very sensitive data. And more unusual is that they are asking for an additional year after employment has been completed, as if the fear of a lawsuit should be so strong that you should be inclined to restrict yourself for another year. And there is no compensation for this additional restriction, only that the supposed repercussions of your breach reflect substantial consideration in return for this additional imposition.

Obviously I cannot advise you on what to do. Having a proper legal consultation with an attorney and having your retained attorney address the law firm's contentions is obviously the optimal way to go. Whether you choose to retain an attorney is obviously up to you. Best of luck to your wife and her friend.

Thank you for your responses Michael, it has at least helped getting a little bit of an outside perspective on this situation and has calmed some of her nerves.

Her new natural gas company also received a letter from the oil company and in their response they clearly laid out both of their positions as simply billing and other clerical work and have nothing to do with any sales positions and will not be asked to discuss anything relating to the oil company. In the letter they state that if they receive a call from a known oil company they will simply forward the phone call to somebody else in the office.

For now we are trying to take the High road approach. What both my wife and her friend did on Monday as a response was send a signed copy of the natural gas company's letter to the oil company's lawyer saying that "I am in agreement to "Natural gas company's" proposed approach to the situation and we are hoping that this will satisfy their concerns. (with no additional time added)

I would say this might have a 50/50 chance at solving this issue as I truly believe that they know that they have no case; however I do believe that the only reason that they are doing this is out of spite and this might not satisfy their ego's. My wife's friend has talked to a friend of theirs at a law firm through all of this ordeal and are ready to fight this as needed as they have said that they have gone to trial against the oil company's law firm and have made them look like fools both times they dealt with them. We have no intention of signing any agreement that the oil company writes up as we feel that it would make us vulnerable to future lawsuits from them.

I am still reaching out to a reputable law firm for a consultation but unfortunately have been playing a little bit of phone tag.

I will update with any new events.