My Ex Employee May Not Compete With Me. Wait, Right? – The Law on Noncompete Agreements

 

 

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So you want to hire an assistant for your photography business. You have perfected your art so that you are busy enough to need some help.

You have decided that it is time to hire an assistant. And, you don’t want someone to just carry your gear and hold a reflector. You need a photographer you can rely on to actually shoot for you if you get sick, or photograph the more simple sessions for you so can book more clients.

But you know how competitive this industry is and you are worried about creating your own competition.  After all, you are going to need to teach this person how you shoot, how to light the session and how to edit like you do so that you can remain true to your successful style. You want to ensure that this person won’t take this education (that you are paying HER for, by the way) and go work for the other big studio in town or open her own shop down the street.

So, you find a form employment contract on the internet that has some firm non-compete language  – something that says in two paragraphs of legal jargon,  “You will never ever compete with me. Like, ever.”

But are you really protected?

NON-COMPETES MAY BE UNENFORCEABLE

A typical non-compete agreement is designed to prevent employees from working for a direct competitor (including themselves) and/or to prevent the employee from disclosing confidential information and trade secrets. However, because public policy and the legal system places heavy emphasis on a person’s right to make a living, courts require these agreements to be limited in scope and duration so that they may be deemed “reasonable.” Courts do not want the person subject to the non-compete agreement to be subject to any undue hardship while seeking employment. As such, courts that have upheld non-compete agreements look at several factors, including:

1.            Legitimate Business Purpose. The restriction must address a real concern. Simply not wanting someone to compete with you is likely not, by itself, going to be a legitimate business purpose. However, needing to protect customer information, pricing or secrets as to your process may be.

2.            Consideration to the Employee. Did you give your employee a benefit in exchange for her agreement not to compete? If the employee is a new hire, simply giving her the job in exchange for signing the agreement may be enough.  However, if she is an existing employee, you may need to provide a new benefit such as a bonus or a raise.

3.            Length of Restriction on Competition.  How long is the restriction to apply? A non-compete that states that the employee may never compete will likely be thrown out whereas one that limits competition for a year or two might be upheld.

4.            Geographical Area Restricted.  If you are a photographer located in Phoenix, is it reasonable to restrict the employee from working for a competitor anywhere in Arizona? What about in a suburb 20 miles away? This factor is highly dependent on the type of business and what your actual business needs require.

5.            The Type of Business to which the Restriction Applies.  If your studio is a portrait studio specializing in general portrait work (families, kids, high school seniors, etc), it is likely unreasonable to restrict the employee from other types of photography.

6.            Public Policy. Is the restriction going to offend public policy?  Will the public, in general, be worse off if the agreement is upheld? If you are a photojournalist, public policy may demand voiding a restriction on other photojournalism work as the public has an interest in the news. Does the restriction offend a basic right, such as a person’s ability to choose her own profession?  Researching your state’s caselaw can help you determine what your jurisdiction looks for in terms of protecting public policy.

And this is where I tell you the same thing I tell you in almost every article I write about the law:  There is no black and white answer as to whether you noncompete agreement will be upheld. Courts will weigh the above factors in light of the specific facts and circumstances surrounding your situation and will make a determination based on such analysis.

However, it is probably safe to say that the more narrowly drafted your noncompete is and the more tightly tailored it is to your specific situation, the more likely it will be upheld.

NONCOMPETE AGREEMENTS MAY EVEN BE ILLEGAL

Yes, as with all laws that are governed by the states, laws differ. And on this particular issue, some states flat out say “no-go.”  For example, California law specifically states that noncompete agreements are void, with two small exceptions.   California even goes so far as to impose liability and hefty fines on the employer if the employer makes the employee sign a noncompete, citing such actions as unfair business practice. Yikes!  Good thing you didn’t use that form you got off the internet, huh?

Bottom line with noncompetes is that you need to think through them carefully.  And consult an attorney with knowledge of the law in your area!  Oh, and maybe don’t teach that new assistant EVERYTHING you know!

For specific questions on noncompete agreements or other contracts, please email Legal Photo Pro at info@legalphotopro.com or contact Kirsten Kowalski directly at 678.386.4751

 

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