I’m a sales manager for independent authorized AT&T dealer for direct sales where I hire my sales reps as a 1099 and they get paid on a commission basis.
I have a rep who recently started with me who quit another office where he did the same thing. The problem is the previous company is stating he signed a contract where he could not worth with any AT&T affiliated companies for 1 year within a 100 mile radius or else they would sue him.
It seems like a complete scare tactic to avoid competition swiping up disgruntled workers. In my understanding the only legal way this could be done is if the company compensates the former worker for the time stating he cannot work for another company and if he does, then he is subjected to being taken to court in violation of the money compensated to him for agreeing to do so.
Does anyone have any knowledge on this? He’s a young smart guy and it seems he’s just being bullied.
Also, if it is wrong is there any legal action that can be taken against the other company?
Thanks in advance!
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Independent Contractor Agreement Question?
Posted on August 25, 2012.
You are describing an old fashioned non-compete agreement. These are standard in situations where a worker can leave a place and take clients with him to another place.
You have a problem on your hands.
If he signed the non-compete agreement then it’s binding. If he wants out then he’d better get a lawyer to get him out.
The laws on the enforceability of non-compete agreements vary WIDELY by State, and you don’t say where you are.
In my State – CA – this non-compete would be unenforceable, as it would be in most States. Most, however, is not all, and there are States that would allow this.
Richard
Those non-compete agreements are common. Also common is that the previous employer won’t do anything about it, except for the bullying tactic you mentioned.
A non-compete agreement is nothing more than a contract. A former employee who violates a non-compete agreement is thus in breach of contract. So, the former employer must sue the former employee for breach of contract. The former employer must then prove (1) there was a breach of contract, (2) the contract terms were reasonable [this becomes a big issue in many non-compete style breach of contract disputes], and (3) the former employer was damaged as a result. #3 is the big iffy in many situations. So, some former salesman works for a competing company. How does the former employer prove that it lost business solely because that former employee went to work for a competitor? Many times it can’t prove damages. Damages are too speculative. And you cannot have a breach of contract unless there are monetary damages. Add on top of that the fact that the former employer must hire expensive lawyers to bring suit, and you can see why many of these non-compete agreements are essentially valueless.
This is a valid non-compete agreement. They are not obligated to pay him during the 1 year period; he can work for a non-AT&T affiliate company and they are not restricting him from working anywhere other than that.
This is not a scare-tactic; it is a standard tactic just for the reason you mention: to keep competitors from snatching up their employees.
If he signed this agreement (which is legal), it can be enforced. There is no problem with them threatening to sue, though it might be unlikely they would unless he was a key employee there.
So if you hire him, you just have to remember what Dirty Harry said: “Do you feel lucky?” While I don’t think your company would be brought into the suit, you would certainly lose that guy for a year and he’d be out some money.