How to break a contract with an employer?

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How to break a contract with an employer?

I signed a contract with a small business a couple of years ago as an independent contractor doing underwater golf ball retrieval. The business owes me money for a couple months of work but is now saying that they are having financial problems and can’t pay me. I would like to start my own business doing the same type of work but on the contract I signed it says that I cannot compete or form a similar business for 5 years from the last date of employment. If they are not paying me, does that breach the contract, allowing me to start my own business?

Asked on May 17, 2012 under Employment Labor Law, Washington

Answers:

Kenneth Berger / Kenneth A. Berger, Attorney at Law

Answered 9 years ago | Contributor

Your question raises several issues in Washington State law.  One issue is whether you were really an independent contractor or if instead you may have been a true employee.  The Washington State Department of Labor and Industries investigates matters like this and may determine that the "employer" owes you wages.  Even the discussion of such an investigation might get you paid.

With regards to the non-compete agreement, Washington case law limits the scope and duration of non-compete agreements.  Obviously, I would need to review the specific agreement, but it strikes me as rather long at 5 years and possibly overbroad if it is not limited in geography.

The fact that they have disregarded a material term, payment, also can be taken as a sign to you that they are repudiating and ignoring the agreement, which most commonly would allow you to do the same.

As always, my comments are only applicable to Washington State and are not a substitute for getting competent, local, and more comprehensive, legal help.

 

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

For a definitive answer, you need to consult with an attorney who can review the exact language of the contract and the details of the situation with you--in terms of contracts, the actual language is critical to determining rights and obligations. (If it's not worth hiring an attorney to review the contract with you, it's not likely that the business opportunity is worth pursuing.)

The above said, as a general legal principal, when party A materially--or in a significant or important way--breaches its obligations under a contract, party B is released from its reciprocal obligations by that breach and may treat the contract as terminated. In a contract of this type, paying the contractor is the most material or critical obligation of the business; therefore, it is highly likely that their failure to pay provides grounds to treat the contract, and its noncompetition obligations, as terminated. 

You also have the right to sue for the money you are owed, even if you treat  the contract as terminated; this is something else to discuss with your attorney. 


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