What constitutes a violation of a non-compete?

UPDATED: Aug 24, 2011

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What constitutes a violation of a non-compete?

A former financial advisor sold me a book of business in IL and signed a covenant not to compete which states that she can not directly or indirectly be employed by another financial services company within a 100 mile radius of any office or location in which she provided services to clients. I have learned that she is employedin FL,  by a financial services company of whose main office is out of IL. Also, she is licensed in states that, prior to, she provided services to clients I bought directly from her. Is she in violation of the covenant?

Asked on August 24, 2011 Illinois


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Most states like California frown on "non-competition" agreements and generally hold that they are in violation of public policy in that they stifle one's ability to hold a job and generate income that benefits this country as a whole.

Most states uphold "non-competition" agreements only when a business is sold and as part of the sale where"goodwill" of the business is specifically allocated in the sales price. The length of time for the "non-compete" must be for a reasonable amount of time and within a reasonable geographic location. What is reasonable depends upon the circumstances of the business being sold and the desired of the parties.

Most states hold that a "non-compete" clause preventing a person from working for someone as opposed to starting a brand new competing business is void against public policy for the reason that precluding someone from earning a livelihood as an employee is detrimental to public policy.

In your question you mention that you have an agreement when you bought your former advisor's book of business that she cannot directly or indirectly be employed by any other financial services company within a certain geographic area of any office or location where she had previously provided services to clients.

My opinion is that if you wanted to prclude her from working as an employee as opposed to starting up her own business to compete with what you purchased, the non-competition clause that you want to enforce will be held void against public policy and not enforeceable.


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