Commenting competitively concerning a noncompete comment

One of the great things about the blogosphere is that it can function in an “open source” mode whereby incorrect or incomplete statements are corrected and questionable arguments or viewpoints intelligently questioned.

We receive relatively few comments on this Blawg, but when we do, they are generally of high quality.

I am aware that our regular readers include many well-read and experienced attorneys, HR practitioners, and professors, and assume that you all will comment if and when you read something here that jumps out as being half-baked, stupid, or just plain wrong.

You are my QA (Quality Assurance) team. (Professors Wilson and Runkel, Ms. Collingwood, Ms. Carvin — this means you, among others!)

So get to the point already!

I got a fine comment today, and since it’s to a post from January, I’m afraid nobody will get the benefit of it unless I point it out. This writer responded to my January 3 post “Department store’s secrets not useful to Victoria’s Secret, these businesses not in ‘material competition,’ ergo noncompete unenforceable”:

George,

While you are correct that the Court determined that Victoria’s Secret and the May Company were not material competitors, that was not the only reason the court refused to enforce the non-compete. The other reason was because there was simply no “protectable interest” at stake for the May Company.

As you know, the law does not allow an employer to prevent competition per se, only UNFAIR competition. In that regard, the law allows enforcement of a non-compete when to do so would protect trade secrets or customer relationships.

In the case of the May executive, the only issue (obviously) is the issue of trade secrets. The evidence at trial showed that the executive who left May spent an insignificant amount of time involved with the intimate apparel business and, further, that the marketing and other plans for upcoming seasons were stale within 6 months because of how fast things change. By the time the Court heard the case, the executive was already 4 or 5 months removed from the May Company.

In addition, the person at Foley’s department store (the division of May where the executive worked) with the most “intimate” knowledge of the intimate apparel business only had a 6-month non-compete, which the court logically took as evidence that even May did not believe that a non-compete was necessary to protect its intimate apparel business beyond 6 months of an employee leaving.

I have been on both sides of many non-compete cases. While it is true that Missouri courts carefully construe the agreements, it is also common to have the agreements enforced against a former employee.

Respectfully,
Michael

The “protectable interest” (trade secret or customer contact) analysis is correct under Missouri law and likely also many other states’ laws as well.

This is why it was surprising to me that the May case focused so much on the contract language. As the commenter appears to be pointing out, even if the contract had been drawn more narrowly, the facts as established on the record didn’t support enforcement.

Perhaps it was the parties themselves, not the courts, who caused this focus on the contract language. In doing so, they may have lost the forest for the trees. I’m speculating, but perhaps May got so wrapped up in defending the language that it got distracted from putting forward its best proof on trade secrets and customer contacts.

I’m not convinced a better case of protectable interest couldn’t have been made. Trade secrets at the executive level could include things to which the lingerie head with the 6-month noncompete wasn’t even privy.

And instead of “customer contacts,” the exec might have had high-level industry or supplier contacts that could be protectable.

In any event, I’ll rewrite my introduction to that post as follows:

The most basic lesson about noncompete agreements is that they are unlikely to be enforced as written unless very carefully and narrowly written to protect provable, legitimate, and important employer interests against damage by improper competition.

The commenter is absolutely right that here in Missouri it is common to have noncompetes enforced, in a proper situation. But the likelihood of success is very variable, depending on many factors.

Finally, I would certainly not want to be understood as encouraging employees to violate noncompetes, or discouraging employers from using them and attempting to enforce them.

As to employees, there’s an ethical, integrity, and credibility dimension. Do you want to be known as the kind of person who goes back on your written word, given in a formal contract, just because it may not ultimately prove fully enforceable as written? I don’t.

As to employers, to the extent you do have protectable interests in trade secrets and/or customer contacts with respect to certain employees (and I’ll bet you do), you should do everything possible to protect those interests.

Understanding that noncompete agreements have their weaknesses, if a departed employee really does you wrong, throw the book at them. In such situations, the proverbial “book” to throw is not limited to the noncompete.

In fact, in a case of truly improper competition, a good lawyer can make a strong case even without a noncompete agreement — I have — and should seek to back up the noncompete with other legal theories that may be available, depending on the facts.

For example, if you can show that an employee took trade secrets with them, or began competing before leaving — and they often do — you will have a much stronger case than if you just show up to argue about the wording and enfoceability of a noncompete.

Related Reading:

General, Organic, & Biological Chemistry

General, Organic, and Biochemistry: An Applied Approach

Lab Manual for General, Organic, and Biological Chemistry (2nd Edition)