Video – Attorney Michael Campbell Discusses Whether Covenants Not To Compete Are Valid. Are They Worth The Effort?
Video Transcript
Ray Hrdlicka – Host – Attorneys.Media “Obviously, one of the three business people leaving…that brings us into this next question about covenants not to compete. Because that person leaves…do they take a third of their business, a third of the business with them? Do they…? How does that work? And obviously, the follow up question, are covenants not to compete worth the paper they are written on?”Michael Campbell – Business Dispute Attorney – Pierce County, WA
“Much of the time, no they’re not, but sometimes they are. For example, in California, covenants not to compete, unless they’re based on something more than just an employer-employee relationship, that is that the person was a partner or something of that sort, then it’s different. But otherwise, just on a pure employer-employee relationship, they are considered violations of the 13th amendment to the constitution in the United States, which prohibits slavery.”
Ray Hrdlicka – Host – Attorneys.Media
“I see.”
Michael Campbell – Business Dispute Attorney – Pierce County, WA
“They are absolutely not favored. There aren’t too many States that follow that approach, the same California approach. I did find a case or two in Montana that seem to do that. But in Washington, covenants not to compete are legal, even between employers and employees. However, they need to be very narrowly written and narrowly construed.
So, for example, if they’re just an employee, and it goes for, the covenant goes for longer than a year, or the period not to compete goes for longer than a year, it’s probably not going to be enforced. Also, if it’s too broad, if it’s too broad in area, because you only cover a, say, the city of Tacoma, and it prohibits you from ever going into this business anywhere in the world, that’s way too broad. And that will not be enforced or will be modified to include just Tacoma.
But as a business, you have to be careful in drawing up covenants not to compete, or any other clause in your contracts, that might be considered to be heavy-handed. Because if the court wants to, they can say, this thing was written unfairly, and it had a very unfortunate result, and it was an attempt to be way too heavy handed with the employee. And therefore, we’re not going to enforce it at all. And therefore, they’re not just going to restrict the scope to just Tacoma, for example. They’re just going to say, it’s gone, it’s done. You didn’t do it right and we’re just not going to enforce it, period. And so, you need to be careful as a business.”
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