What constitutes the violation of non-compete agreement?

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What constitutes the violation of non-compete agreement?

I signed a non-compete agreement after selling my company to a larger company and took a position within the larger company but was a commission based employee. I did have shares but it in order validate the shares of the company, I needed to meet a sales quota which I did not meet. In fact, I produced a very low number of sales. Eventually I left the company and signed the non-compete agreement. I now have opportunity to work for a much larger company working in the same industry but has different niches within the industry but does overlap in some areas. Will I be in violation of the non-compete agreement if I accept the job?

Asked on February 26, 2014 under Business Law, California

Answers:

S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

It would be necessary to review the non-competitive agreement to determine what is allowed and what is prohibited with regard to its restrictions.

Since you can work in areas at the new job which are niches not in competition with your former job, that should not violate the non-competitive agreement.  As for those areas that you said "overlap", is it possible to avoid that potential conflict until the expiration of the non-competitive agreement?  Most likely, your former company is concerned about losing customers from your former job.  However, since you didn't meet the sales quota, that issue should be of limited concern to your former company.

The non-competitive agreement has to  be reasonable as to scope, duration and proximity.  If it is not reasonable as to what is prohibited and/or its duration is excessive and/or it is not limited in geographic proximity, it may  be construed as overbroad by a court.  A court can modify the terms of a non-competitive agreement if the provisions are unreasonable.  It would be advisable to have the non-competitive agreement reviewed by an attorney.  I don't think you should miss out on an opportunity with the new company and if the terms of the non-competitive agreement are reasonable, conflicts with the agreement may be avoidable.  In the event the former company files a lawsuit against you for breach of the non-competitive agreement, raise the issues of duration, scope and proximity when arguing that unreasonable terms should be modified by a court.


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