Tuesday, September 22, 2015

When Non-Competes are Non-Specific, Bad Things Happen

There are not many things in business as bad as a former employee setting himself or herself up in direct competition with his or her former employer. It's worse, however, when the former employee is permitted to do so in the face of a non-compete agreement that the employer originally thought was air-tight. 

Such was the scenario that Boyds clothing store recently found itself in, when it tried to prevent one of its former men's and women's footwear floor managers from opening up his own shoe store in Philadelphia. That former employee had previously signed a non-compete agreement with Boyds, which prevented him from:
"directly or indirectly, individually or as a partner or as an agent, employee or stockholder of any corporation or otherwise. . . [s]olicit or accept a job offer from another men's and or women's retail clothing company who engages in the sale of men's and/or women's clothing that is within a (50) mile radius,"
of any Boyds' store, following the end of his employment.

Pretty straightforward, no?

Not quite. 

The Pennsylvania Superior Court disagreed with Boyds' contention that the language above prevented the former employee from starting up his own shoe store. Distilled to its core, the Court held that by going into business for himself, the former employee had not "solicited" or "accepted" a job offer from a competitive retail clothing store. Not willing to accept form over substance, the Court rejected Boyds' argument that the former employee's own shoe store—a separate legally incorporated entity—had, in effect, "offered" him a "job," upon its creation, which the former employee then "accepted," placing him in violation of the non-compete agreement. Instead, the Court found that the plain language of the non-compete agreement simply did not prevent or preclude outright ownership of a competing business; rather, it prohibited only soliciting and accepting a job offer, not staring up one's own establishment. Those are two different things. 

The lesson of this case should be obvious; non-compete agreements (like all legal contracts, for that matter) should say what is meant and mean what is said. That maxim, unfortunately, is often elusive in the the world of highly-convoluted, grammar-strained legal writing, which attempts encompass all known scenarios and possible outcomes by employing broad, generic, and occasionally obtuse language. But it doesn't have to be that way. Just because a legal document—whether a non-compete agreement, employment contract, or independent contractor agreement—carries with it binding obligations and requirements under the law, doesn't mean that it needs to be written like dusty law textbook. Contracts such as these should employ simple, non-technical language that is capable of being both easily read and easily understood, and is not subject to questionable interpretations. Similarly, over-arching concepts and descriptive scenarios should be espoused in favor of plain-English statements of intent and direction. 

If Boyds had truly wanted to prevent its former employees from starting up their own clothing businesses down the block and siphoning away potential customers, it should have written its non-compete agreement to say exactly that. For example, "after termination of employment with Boyds, the employee agrees not to own, control, or manage any men's or women's retail clothing business located within 50 miles of any Boyds' store," is easy-to-understand language that could have accomplished Boyds' intent, protected its legitimate business interests, and avoided the exact scenario it now finds itself it. 

Oh, and it probably would have saved Boyds a lot of money in attorneys' fees, as well.