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Posts published in “Day: January 16, 2018”

Too far on non-competition


The Legislature put the shoe on the wrong foot in 2016 when it passed a bill requiring employees to prove they did not harm their former employer if they violated a noncompetition agreement. The new law presumes irreparable harm to the employer, unless the employee can present proof to the contrary. The law is unfair, unnecessary and should be repealed.

During my private law practice before going onto the Idaho Supreme Court, I wrote a number of employment contracts with noncompete clauses and litigated on both sides of the issue. In 12 years on the Court, I authored a number of opinions on noncompetes and was probably more favorable to employers than most of my colleagues. I grew up believing people should keep their word and honor their contractual commitments.

While I routinely ruled that people should live with their contractual undertakings, noncompete provisions were a slightly different animal. They were often foisted on the employee on a take-it-or-leave-it basis in contracts where the employee had very few rights. Courts around the country have taken a jaundiced view of such contracts and Idaho has moved in that direction.

When I broke my wrist in 2002, I had a great physical therapist. About six months after my treatment ended, he called with noncompete troubles. He had taken a job with a local hospital and would be caring for its patients. His former employer headquartered in Texas was threatening a suit for violation of his noncompete, which he did not recall seeing in the contract. The threat against him was outrageous because there was no way he would be competing for patients of the former employer. This was not an uncommon situation.

Where the seller of a business agrees not to compete against the person buying the business, the buyer should be protected against a breach of the noncompete. In the regular employment setting, if the employer pays the employee extra for entering into a noncompete, or invests in specialized training for the employee, or gives the employee access to private business secrets, there are grounds for protection of the employer. If those elements are not present and the employer just wants to keep the employee chained to his or her job, protection may not be warranted.

In normal contract cases, a person suing for breach must prove all of the elements--that there was a contract, that the defendant violated it, that the plaintiff was damaged and the amount of damages. The 2016 bill removed the third element for noncompetes, requiring a former employee to prove the employer was not damaged. I am not aware of any reason why noncompete clauses should be treated differently than any other contractual provision.

During my private practice, I sometimes brought suit to enforce noncompete clauses. Just like any other contract case, if an employer has a good case it can win. If not, it shouldn’t. Noncompete cases do not warrant special rules. Noncompetes can serve valid interests, but they can also be used to unnecessarily stifle competition, to keep talented people from advancing, or to squelch the innovative employee who wants to strike out on his or her own. The pre-2016 legal landscape was properly balanced. That balance should be restored by repeal of the 2016 legislation.