Slashdot Mirror
Judge says Internet Obsoletes Lengthy Non-Competes
dashNine writes "The NLJ's Law News Network has this story on a New York case in which a judge refused to enforce a Web firm's noncompete clause, saying that "in the Internet environment, a one-year hiatus from the work force is several generations, if not an eternity." Another well-deserved nail in the coffin of this instrument. " Non-competes are definitely an annoying part of the industry. Do you think this is legit?
Disclaimer: I am a lawyer, but this is not legal advice. If you need legal advice, see an attorney licensed in your jurisdiction.
The level of misinformation and erroneous explanations of law I'm seeing in other posts is unusually high . . .
The law has *always* been hostile to agreements in restraint of trade, *including* non-competition clauses. Not just in some states, not just in the U.S., but the entire English speaking world which inheritted the Common Law of England.
In front of me is a case on the subject from 1711. Yes, nearly 300 years old. [Mitchel v. Reynoldds, 1 P. Wms. 181, 24 Eng. Rep 347 (K.B. 1711)]
It applies the same rules used today. An agreement in restraint of trade, particularly one barring a man from engaging in his trade, is presumed illegal, and must be shown to be necessary, Particularyly, a non-competition clause must be necessary to accomplish the purpose of the contract.
In Mitchell, a baker sold his bakehouse, and agreed not to compete in that parish for five years--which he promptly violated, claiming that the bond was void by law. The court found the clause enforceable because it was the only way the business could possibly be transferred--if the old baker could open again across the street, he would take all of the business that had supposedly sold to the new baker. So in that one parish (not even the entire city), the baker couldn't sell--but he could in the rest of England.
Essentially the same rules apply today. To enforce such a clause, it must
1) actually be necessary to achieve the contract,
2) be as limited in time as possible--only long enough to achieve the purpose needed, and
3) be limited in geography, only covering the minimal region needed.
Overstep any of these by even a little bit, and the entire clause is thrown out. In five years of full-time practice, I only saw one non-compete clause that it wasn't clear I could have thrown out [hint: *don't* try to write your own--pay someone who knows what he's doing.].
So there's nothing new or shocking here. If there's no trade secrets (these could include in-house techniques for getting the job done faster), you fail part one. Today, a year is forever, and it would be hard to conceive of any internet related field where a year wouldnt' be too long, and two fails. Three, however, isn't clear--the entire world might be a single geography for purposes of competition.
Just for an example: suppose that a week after they sold slashdot, rob, hemos, & rob quit andover and formed the new cmdrtaco site, covering the exact same topics, and with discussion forums. If this were possible, and the non-compete clause couldn't be enforced, andover would be nuts to pay anything, and would certainly pay much less than they did. On the other hand, if andover could prevent them from competing for a year, andover would probably keep the audience if, a year later, they opened a competing site. In fact, much less than a year would do.
hawk, esq.