When you sign an agreement where you must pay money, such as a contract to purchase an asset or subscribe to a service, you usually read every word to make sure that you are not agreeing to hidden costs that the seller did not tell you about verbally. If you are the one who stands to gain financially from the agreement, though, you cannot sign quickly enough. If your signature on the dotted line is the only thing standing between you and uninterrupted cash flow, then who cares about the details? Employment lawyers will tell you that, no matter how excited you are about your new job, and no matter how well it pays, you should review every word of every provision of the document carefully.
Something as simple as a mandatory arbitration clause can mean that, by signing the agreement, you are giving up the right to file lawsuits to ask the courts of Montana to rule on disputes arising from it. Employers sometimes ask prospective, current, and former employees to sign non-compete agreements, and while Montana offers better protections against non-compete restrictions on workers, there are still plenty of ambiguities and inconsistencies in the Montana courts’ application of the law. The Bozeman non-compete review lawyers at HKM Employment Attorneys LLP can help you decide whether to sign a non-compete agreement your employer has offered you and can help you figure out whether a non-compete agreement you have already signed is legally enforceable.
What is a Non-Compete Agreement?
A non-compete agreement is a contract between two parties in a business relationship with each other, such as two business partners, a company and its client, or an employer and an employee. The parties can sign the agreement while their business relationship is ongoing, or they can sign it before the relationship begins or after it ends. The parties agree that neither of them will engage in business activities that directly compete with the other. With entrepreneurs who formerly worked together as partners, it means that one or both of them agree not to set up a business similar to the one they operated together, to avoid poaching customers from each other. Employers can even ask employees to sign non-compete agreements, whether before they begin their employment or sometime later, promising not to work for a competitor of the employer during the term of employment or after the present employment relationship ends. Employers sometimes even include non-compete provisions in employment contracts.
Taken to the furthest possible extent, non-compete agreements can turn into “you’ll never work in this town again” agreements. Non-compete agreements include restrictions on geography and time. It is patently unfair to require a cardiologist to promise never again to practice cardiology after she stops working at your hospital. It is less unreasonable to ask her not to work for any other hospitals in Gallatin County for a year after she stops working for you. The employee is more likely to sign the latter agreement. It will not ruin her career; at most, it will require her to adjust to a longer commute to work until the next year, when she can ask her employer to transfer her to a work location closer to her home.
Whose Interests Do Non-Competes Serve?
Non-compete agreements almost always arise from a power imbalance. Employers ask employees not to work for competing businesses after the employment relationship ends, but employees do not make their employers promise not to hire employees with similar qualifications. If you think it is against the spirit of a free-market economy to place restrictions like these on the activities of employees, Montana lawmakers agree with you.
Non-compete agreements and non-compete provisions in employment contracts are only appropriate for workers whose work makes them privy to many of the employer’s trade secrets. It is most likely corporate overreach if a hospital asks a cardiologist not to seek work in the cardiology department of a competing hospital, but a non-compete makes more sense for a high-level manager who was involved in the financial management of the hospital. The standard of care is the same for cardiologists everywhere, but every hospital manages its finances differently.
The Case Against Non-Compete Agreements
There is a growing nationwide movement against non-compete agreements and non-compete provisions in employment contracts. In 2021, President Biden signed an executive order authorizing the Federal Trade Commission to take action against employers that subjected their employees to unfair non-compete provisions as a condition of their work. The research that led to the issuance of the executive order found that 20% of employees who did not have bachelor’s degrees but were employed pursuant to contracts had non-compete provisions in their contracts.
Fortunately, Montana lawmakers had already figured out that non-compete agreements can easily cross into unfairly restrictive territory. Therefore, even though Montana courts can decide on a case-by-case basis whether a non-compete agreement is enforceable, they tend toward ruling that former employees are free to seek any employment they choose, even if their new employment activities compete with their former employers.
Specifics of Montana Non-Compete Agreement Law
Montana case law shows that the shorter the duration of a non-compete agreement is, the more likely the courts are to rule that the agreement is enforceable. They are also more likely to enforce restrictions on current employees than on former employees. In some cases, the courts have ruled that a contract is still enforceable, even if its non-compete clauses are not. When the court strikes provisions from a contract but declares that the rest of the contract is legally enforceable, this is known as blue penciling. There is enough variation among non-compete agreement disputes that it is worthwhile to hire an employment lawyer before you sign an agreement that includes non-compete provisions.
Contact HKM Employment Attorneys for Non-Compete Agreements
The Bozeman employment lawyers at HKM Employment Attorneys LLP, can counsel you about employment contracts that include non-compete provisions. Contact the employment lawyers at HKM Employment Attorneys LLP in Bozeman, Montana to set up a consultation.
