Is Selective Enforcement a Valid Defense in a Noncompete Case?
When departing employees are hit with a cease and desist (or worse, a request for a temporary restraining order), they sound a familiar refrain: "But they let Joe go without any problem!"
At first blush, this sounds like a reasonable protest; after all, why should they be singled out for worse treatment than their colleagues who were allowed to move on to greener pastures without fanfare or blood? Assuming, for the sake or argument, that this former employee's assumptions about what did - or didn't - happen with their former colleague is correct (at the risk of stating the obvious, this former employee's assumptions may be terribly mistaken), we are still left with a critical question:
Does a former employer's selective, or inconsistent, enforcement of its non-competes constitute a viable defense to a breach of non-compete claim?
Where this Defense Has Been Raised
There are two contexts, or areas, where defendants have broached this issue:
First, based on principles of equity, that the former employer has waived, or is estopped, from asserting its right to enforce the non-compete; and,
Second, that the former employer cannot establish a critical prong in its case - namely, that it is merely trying to protect and enforce a legitimate business interest - because if it were so, then the former employer would have been enforcing it across the board rather than specifically targeting this defendant and not other former employees.
How this Defense Has Fared Before the Courts
Truth be told, the first defense in particular - other than in extreme cases - has fared rather poorly, which should not be surprising; after all, courts across the country require a substantial showing before they will hold that a party has affirmatively waived its rights to enforce a provision of an agreement.
For example, in Laidlaw, Inc. v. Student Transportation of America, Inc.,20 F. Supp. 2d 727 (D.N.J. 1998), the federal court for the District of New Jersey expressly rejected this defense, stating that “Laidlaw’s actions (or lack thereof ) in other instances do not amount to a waiver or estoppel of its contract rights,” and further held that requiring an employer to enforce every restrictive covenant, without regard to cost-effectiveness or individual circumstances, was “impractical and unfair, not only to [the plaintiff company] but to other former employees.”
On the other hand, in facing some unusual facts in Surgidev Corp. v. Eye Technology, Inc., 648 F. Supp. 661 (D. Minn. 1986), the federal court in Minnesota accepted this defense, because the former employer had permitted at least twenty-eight other former employees, including high-ranking executives, to leave and join competitors, and now (unfairly) chose to single out these 4 former employees for enforcement.
The defense that selective enforcement of a non-compete tends to undermine the former employer's claim that they are seeking to protect a legitimate business interest has enjoyed marginally better success, such as in the New York case of Estee Lauder Cos. v. Batra, 430 F. Supp. 2d 158, 181–82 (S.D.N.Y. 2006), wherein the court did not accept the argument in its totality, but nevertheless reduced the covenant’s duration based on Estee Lauder’s treatment of other former employees.
In short, and at the risk of stating the obvious, a former employee should not assume that his/her old employer's laxity in enforcing its non-competes against other employees somehow furnishes an absolute defense to a non-compete claim; it's a very tough defense to win. That said, it remains an avenue worth pursuing as an attempt to whittle down the scope and duration of the former employer's non-compete.
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