In many instances that an employee is considering a new position with a competitor, he/she is confronted by the following conundrum:
- This job offer, as great as it is, has a short expiration date;
- The employee is still constrained by a noncompete agreement; and,
- The new prospective employer really likes the employee, but probably is not interested enough to get embroiled in any legal drama between the employee and (soon to be) ex-employer.
So what are the employee's options to get this issue resolved?
- Option #1: Go directly to the current employer and ask for a written waiver of the noncompete. True, in an ideal world, this is the easiest and cleanest of solutions. But in the real world, that will rarely work, as employers are typically loath to relent on their noncompetes, if for no reason other than their fear of opening the floodgates to other employees fleeing unchecked to direct competitors.
- Option #2: Take the new job with the clear recognition of the possibility that the former employer may seek injunctive relief to prevent the employee from continuing in their job, or otherwise try to compel the new employer to terminate the employee rather than endure the legal headache that accompanies his/her hire. Naturally, the likelihood of the former employer incurring the time and legal expense of pursuing this course of action is highly fact-specific, and will often turn on the importance of the particular employee to the company, the likelihood of business following the employee out the door, and the litigiousness of the particular decision-makers.
- Option #3: Preemptively file a declaratory judgment action with the court - before taking the new job - and seeking a judicial determination as to what extent - if any - the restrictve covenant is enforceable under the particular jurisdiction's laws. As the general counsel of one of my old clients put it, "Sometimes it's better to ask for permission beforehand than to have to ask for forgiveness after the fact."
Why Preemptively Filing a Declaratory Judgment Action May be a Good Strategic Idea
While it is certainly true that by proactively filing a lawsuit, that does come with a certain expense that would not be present if no lawsuit was ever filed under Option #2 above, this option offers a number of benefits, including that:
1) the lawsuit is extremely limited in scope, which should keep costs relatively low; and,
2) by filing before accepting the job offer, it should prevent the employer from being able to recoup their legal fees incurred in defending the action, particularly in cases where the underlying restrictive covenant includes a provision entitling the employer to recover the fees they incur seeking to enforce the agreement for a breach or threatened breach.
