In Everett J. Prescott, Inc. v. Leahy, Maine’s U.S. District Court recently denied Everett J. Prescott, Inc.’s (EJP) motion for a temporary restraining order that would have, among other things, required its former employee to cease working for one of EJP’s competitors. This case involves a relatively common type of agreement that some employers require their employees to sign—a non-disclosure and non-competition agreement.
Many employers require their employees to sign non-competition agreements because they do not want their employees to have the ability to go work for a competitor and take business away from them. Similarly, many employers have trade secrets that they do not want employees to share with their competitors. To protect those secrets, they require their employees to sign non-disclosure agreements which prohibit employees from sharing trade secrets with anyone even after they stop working for the employer.
In this case, EJP asked the court to order that Mr. Leahy could not work for its competitor in any capacity. EJP wanted the court to enter such an order without even giving Mr. Leahy a chance to respond to EJP’s arguments for why he breached the non-competition and non-disclosure agreement between him and EJP. The court denied EJP’s motion because, among other reasons, the non-competition agreement Mr. Leahy allegedly entered into did not say that he could not work for an EJP competitor in any capacity—it only said that he could not work for an EJP competitor “in the same or similar capacity or function to that in which” he worked for EJP.
There are legitimate reasons for employers to require employees to enter into non-competition agreements. In many cases, however, employers have far more bargaining power than employees and, as such, they can force employees to sign extremely restrictive non-competition agreements. These restrictive agreements can sometimes chain an employee to his job with the employer because he cannot leave to work for a competitor. Also, if an employer terminates an employee with one of these restrictive agreements, the employee may find it difficult to obtain a job with another employer without breaching the agreement.
Given the restrictions that non-competition agreements have on workers’ abilities to support themselves, Maine courts have found that they run against public policy. For that reason, courts will only enforce them to the extent they are reasonable. Courts examine such things as how long the agreement restricts the worker’s ability to work for a competitor and the geographic scope of the restriction. If you want advice on whether a non-competition or non-disclosure agreement that your employer wants you to sign, or has made you sign, is enforceable, you should contact an experienced employment lawyer.