The New York Times recently told the tale of a factory manager who’d signed a noncompete contract in 2007, only to find that the agreement effectively prohibited him from working in the only industry he’d ever known, anywhere else in the United States. The story is a remarkable example of a growing trend: where noncompete contracts were once used as a safeguard against the transfer of trade secrets, they are now being used to stifle workers’ negotiating position and are harming regional economies in the process.
The story begins with Keith Bollinger, a factory manager who started working in the textile industry shortly after his high school graduation. His first position in 1982 involved pulling fabric off of cardboard rolls, but through the years he worked his way up from being an hourly employee to a salaried employee responsible for quality control management at two of the family-owned company’s plants. His responsibilities included working with customers and required general knowledge about the process rather than any proprietary or specialized information about the company, which provides finishes for fabrics. In 2007 he was offered an annual raise of $1,300 that brought his salary to slightly over $70,000. He was also provided a $3,500 bonus and asked to sign an employment agreement that included the aforementioned non-compete clause as well as a confidentiality clause.
Six years later the company began experiencing financial hardships. They laid off employees and cut salaries, including Mr. Bollinger’s. He was offered a position by a competitor in the next town that represented a salary that was more than 20 percent more than what he was being paid, and he accepted after having his noncompete reviewed by an attorney who indicated that it was likely unenforceable. After his departure his original employer sued him and asked a court to remove him from his job, charging that he would eventually disclose proprietary information. The judge who initially heard the case refused the request on the grounds that it would effectively prevent Bollinger from “seeking employment anywhere in North America in the only profession he has practiced since graduating high school.” That decision was reversed on appeal and he was barred from returning to work. A year later his employer charged that he had continued working for the competitor even after the injunction was in place.
The case not only created a strain on Bollinger and his family, but also on the customers that had previously worked with the original employer. It was finally resolved via a settlement, with the original employer accepting $200,000 from the competitor. While the litigation had been going on, Bollinger had to wait until his noncompete had lapsed, and had then found another job. He said that had his original employer offered to match the $14,000 raise he was offered he would have stayed on instead of costing both companies in legal fees, and putting him and his family in debt due to a lack of income.
If you’ve been asked to sign a noncompete contract, or have already signed one in the past and are now concerned about its impact on your future, you need legal counsel with experience in employment law. We can help. Contact Schorr & Associates today to set up a convenient time for a consultation.