Monday, October 31, 2011

What to look for (and avoid) in a Maryland Non-Compete Agreement

Employers often use their economic leverage to force one-sided non-compete agreements on employees.  Below is a list of the top 5 unfavorable contract terms I  look for when I review non-compete agreements.

1.    One-sided attorney fee-shifting.  In a normal breach of contract lawsuit, each side pays its own fees.  Employers often get around this rule by including in a non-compete agreement, a clause that states the employee will pay for the employer's attorneys fees if the employer is successful in enforcing the agreement.  

2.   Over-broad restrictions on working.  An Employer  can only enforce non-compete agreement against a narrow class of employees and only when it can state a legally protectable interest.   Employers nevertheless  often define competition so broadly that, if enforced, the employer could not work in an  entire industry (even if the employee is not competing).   

3. Liquidated damages.  It is often very difficult to prove damages when an employee is accused of violating a non-compete agreement.  Employers sometimes attempt do away with the necessity of proving actual damages by stating  that amount of liquidated damages is presumed.  A Maryland Court decision suggests that liquidated damages provision are  invalid in most situations involving non-compete agreements.   

4. Court Selection and Choice of Law.   Parties to a contact are generally allowed to choose the Court that will hear their dispute and the law that applies to those disputes.  Employers often use their leverage to pick the Court and the Law believed to be the most favorable to them.   

5.  Jury-Waivers and Arbitration Clauses.  In non-compete litigation, employers generally prefer to be in front of judges (not juries).  As such, employers often use their leverage to make employees waive their right to a jury or require that all disputes be resolved in arbitration (and not Court).

 Here are a few articles that discuss  ways to combat one-sided contract terms:


No comments: