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Non-Competition Agreement: By the Power of The Contract, The Arbitrator Has The Power!

| Oct 9, 2013 | non competition disputes |

Attorney, Lawyer in Cleveland, Ohio for Non-Competition Agreements

For those of us that grew up watching Saturday morning cartoons (that were only show once on Saturdays), we remember He-Man and the Masters of the Universe. Problems would resolve when Prince Adam raised his Power Sword and yelled, “By the power of Grayskull … I have the power!“ What does He-Man have to do with non-competition/no-compete agreements? Let’s circle back to that question.

If you are reading this, you have probably done a Google or other search engine search for “non-competition agreement enforceability” or “limits of a no-compete agreement.” You are probably wondering about the non-competition agreement that you signed at the beginning of your employment and what that means now that you are thinking about or have already left the evil empire. Because every non-competition or no-compete agreement is different and highly dependent on what language or terms were agreed to, stop searching the internet for an answer. Call an experienced employment lawyer and make an appointment to have your agreement reviewed. It may cost you a little bit, but then you will know where you stand.

Cleveland, Ohio Non-Compete, No Competition, Agreement, Contract Attorney Lawyer Law Firm

Here is a good example of what happens when you guess. In Nationsbuilders Insurance Servs., Inc. v. Houston Int’l Ins. Group, et al., the employer got two employees to sign a non-competition/no-compete agreement. Under the terms of that agreement, the employees could not compete or plan to compete for one year. Upon becoming former employees, these enterprising individuals focused on the non-compete language and the date. They used the non-compete year to prepare to compete as soon as the year lapsed. In order to hit the ground running, they mailed marking materials to potential clients informing them of when their new business would start after the year was up; developed underwriting guidelines; and also conducted market research. Of course, the former employer discovered that these activities were underway and demanded arbitration as provided for in the arbitration clause of the non-completion/no-compete agreement.

From there, the arbitrator held that the employer was damaged because “the [ex-employees] ‘breaches deprived [the employer] of the benefit of its bargain, i.e., a one-year restricted period with no competition, including solicitations, and no ‘head start’ planning for competition.” As for the remedy, the arbitrator then held that the employer should “be restored the benefit of the bargain” and extended the restricted period by another 12 months.

Can an arbitrator do this? Does he have such power?

According to the trial court, no. To that end, the trial court vacated the arbitrator’s award, finding that the arbitrator exceeded his power by extending the time period of the non-competition agreement.

But, litigation on these issues tend not to stop in the trial court. And, the Texas Fifth Court of Appeals reversed the trial court, holding that the arbitrator had the power to insist that the employer get the benefit of the bargain – a full one year of no competition.

When the ruling came out, I just pictured the arbitrator holding up the Power Sword and yelling “By the power of the arbitration agreement …. I have the power.”

In the end, these employees could have avoided a lot of problems had they consulted an employment lawyer about their non-competition/no-compete agreement. Now, they face another year of lost income (plus the over year and a half litigating the matter) and attorneys costs for litigating this matter through an arbitration, trial court and court of appeals. Unlike Saturday morning cartoons, non-compete issues can’t be resolved in a half hour … and cost a lot more.

If you have a non-competition, or even think that you might need an employment lawyer, then it would be best to call the right attorney to schedule a confidential consultation at 866-797-6040. The Spitz Law Firm and its attorneys are experienced and dedicated to protecting employees’ rights and solving employment disputes.

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