Help Wanted: Laid off, with noncompete deal
Carrie Mason-DraffenCarrie Mason-Draffen
Mason-Draffen, a business reporter, writes a column about workplace issues.
DEAR CARRIE: I was laid off after working for an insurance company for 25 years. I last worked there as a claims adjuster. After I was hired, I signed an agreement stating that if I left for any reason, I could not legally pursue a job at a company that does the same things we do. Specifically, the policy says I couldn't go to work for other insurance companies, health care providers, third-party administrators or bill auditors. We never received anything in writing, however. And our policy manual doesn't address how long the restrictions would last. If all the prohibitions are still in effect, I won't be able to earn a living. I'm afraid a prospective employer might call my former employer, only to be told that I am in breach of a contract. Could a document I signed 25 years ago still limit my employment options? -- Contract Current?
DEAR CONTRACT: Help Wanted checked with an employee-rights attorney who has represented employees in disputes like yours for more than 30 years. You're going to like what Alan Sklover of Sklover & Donath in Manhattan has to say about noncompete agreements when an employee is laid off.
Because you were let go, the noncompete you signed probably doesn't mean much now.
"In New York State," Sklover says, "the general rule of law is that if an employee's job is terminated without that employee having committed bad conduct or egregious poor performance, the employee's noncompete agreement is simply not enforceable."
Many years ago, Sklover said, New York's highest court, the Court of Appeals, decided that a noncompete agreement is a two-way promise: The employer promises employment, and in turn the employee promises not to work for the employer's competitors if he or she either voluntarily resigns or is fired for bad conduct.
"The court reasoned that when the employer takes away its promise, the employee does not have to honor her or his promise, which makes a lot of good sense," he said.
Many people -- both employers and their lawyers -- don't know this rule, Sklover said, and they still try to enforce "unenforceable" noncompete agreements through the use of lawyers' cease-and-desist letters, sent to the next employer, threatening lawsuits.
"If this happens to the reader, he should simply retain an experienced employment [attorney] to send out what in our office we call our 'don't-you-dare letter' in response," he said. "It explains the law to those employers and their attorneys, and reminds them of their own potential liability for interfering with your entirely legal and appropriate employment."
He added, "Those usually do the trick."
If you want to allay your fears now, Sklover said, you should have an employment attorney write to your former employer even before you start your job search, warning that the company shouldn't raise the specter of a contract breach to a prospective employer. Or he suggested you send your former employer a copy of this column.
Even when an employee quits, judges are skeptical of noncompete agreements if they keep an employee out of work.
"If you show a judge a good defense to a noncompete agreement -- and many exist in the law -- most judges will either not enforce it or try to forge a compromise that includes a short period of time for the restriction, like 45 or 60 days," Sklover said.
It's worth mentioning that if your contract were enforceable, that would still be the case even though you signed it 25 years ago, Sklover said.