The story we are about to tell you is sad, but true. It’s the story of an executive who has worked in his field for decades and developed a unique and valuable skill set. He is then approached with the professional opportunity of a lifetime. But he is handcuffed from pursuing this opportunity because years ago, he signed a noncompetition agreement with his current employer. Unfortunately, we have seen this scenario play out with countless executives over the years. In our experience, here are the three most common misconceptions executives have about the noncompete they signed in the stack of new hire paperwork.
1. Noncompetes are not enforceable. This is simply not true. Courts in Oregon routinely enforce noncompetes. Provided certain threshold requirements are met, the law allows your employer to keep you from competing for a period up to 18 months after your employment ends. The agreement can restrict you from working for any of your company’s competitors or in your company’s entire industry. Also, depending on the geographic area in which your employer operates, the agreement could prevent you from working in your field worldwide.
2. No court would really tell me that I can’t work in my field due to my noncompete—that would effectively make me unable to earn a living. It merits repeating that noncompetes are enforceable. You can lose valuable skills, connections and most critically your income in your field of expertise for up to 18 months. To put it bluntly, the law may not care how long you’ve been in the industry or how much of a pay cut you will take to sit out during your noncompete period.
3. I can just “buy” my way out of a noncompete. Many of the executives we deal with are savvy business people who have been involved in some sort of contract dispute. You may know that when one party sues the other over a breach of contract there are usually money damages involved. You might erroneously conclude that you can set aside a certain amount of money to pay any damages from breaching your noncompete and go ahead and work for the new employer. But you may not have experience with injunctive relief and temporary restraining orders. This means that if you signed a noncompete, your former employer can run into court and get a judge to issue an order that enjoins you from working from your new employer. Moreover, you could be found in contempt of court if you violate that order. Your noncompete may also require you to pay your former employer’s attorneys’ fees.
What can be done? There can be serious, far-reaching consequences for the unwary executive who signs a noncompete. If you find yourself facing a new job prospect and you are asked to sign a noncompete, consult with a lawyer. Likewise, if you are considering leaving your job and have signed a noncompete, you may also want to consult with counsel. There are threshold requirements an employer must meet to have an enforceable noncompete and if any are missing the noncompete may be voidable. The one thing you should not do is put your head in the sand and sign an agreement based on myths and not facts.
We are available to assist you with any questions regarding noncompetes, executive employment agreements, or other employment issues.
Originally published in the April 2018 edition of the Financial Executives International Portland weekly newsletter.