Determining if a Montgomery County Non-Compete Agreement is Reasonable
A non-compete agreement is a type of employment contract that restricts where a departing employee may work following his or her departure from a current position. Montgomery County workers in Maryland see their fair share of these agreements given the large number of major businesses and research-oriented institutions in Bethesda, Silver Spring and other localities within the County.
The purpose of these agreements is primarily to protect an employer when its employee wants to begin working for a competitor. However, unless properly written, a non-compete agreement in Montgomery County may unreasonably inhibit the former employee’s ability to earn a living. Because of this danger to workers, Maryland courts are often hesitant to enforce noncompete agreements. But when prepared with reasonable limitations, they will be enforced, as evidenced by the following court case. Speak with a knowledgeable non-compete agreement attorney at the Spiggle Law Firm today about determining if a Montgomery County non-compete agreement is reasonable.
Morgan-Chandler v. Consortium of Maryland
On January 20, 1993, Susan Morgan-Chandler began working for The Consortium, Inc. (TCI) as a technical writer. When she began working for TCI, Ms. Morgan-Chandler agreed to a non-compete agreement.
This non-compete agreement prohibited Ms. Morgan-Chandler from soliciting any clients away from TCI or from working for any of TCI’s clients for a period of one year after she left TCI. During her tenure, Ms. Morgan-Chandler worked primarily with TCI client, Bell Atlantic.
While still employed by TCI, Ms. Morgan-Chandler expressed her interest in working for Bell Atlantic, but through a different employer. Effectively, she wanted to leave TCI, but take Bell Atlantic with her. TCI agreed, but only if she would pay $10,000 to buy out her non-compete agreement. She refused, and a lawsuit resulted.
TCI argued that its non-compete agreement was enforceable because it had reasonable limitations, namely the one-year duration and its application to only Bell Atlantic. While it was silent on its geographic reach, TCI only sought to enforce the non-compete agreement within the Washington, D.C. metropolitan area.
The court sided with TCI and concluded the noncompete agreement was enforceable. It found that a one-year limitation was reasonable. And even though the non-compete agreement stated nothing about geographical scope, it was limited to only one client, Bell Atlantic. Additionally, TCI agreed to limit the non-compete agreement to one metropolitan region, which was also the same region in which Ms. Morgan-Chandler did her work for Bell Atlantic.
Reasonable Versus Unreasonable Limitations
As additional evidence of its reasonableness, the court in Ms. Morgan-Chandler’s case acknowledged that the $10,000 buyout was probably a smaller amount than the profits TCI would lose if Ms. Morgan-Chandler immediately began working for Bell Atlantic through another employer. But how does the court determine if a Montgomery County non-compete agreement is reasonable?
Unfortunately, there is no hard and fast rule. What is reasonable in one situation could be found unreasonable in another. For example, a non-compete agreement with respect to a business executive of a regional company could be deemed reasonable when applied to several states. But the same geographical limitation may be considered overbroad when applied to a landscaper who worked for a landscaping company where all of its clients were solely within one county.
Alternatively, as was the case with TCI and Ms. Morgan-Chandler, a non-compete agreement with no geographical limitation may be considered reasonable if it only applies to current clients of the former employer.
Another thing to remember is that the geography and time limitations will be examined together. Using the above example, the non-compete agreement for a Montgomery County landscaper might be enforceable across several states if it only applied for a few months. And if the non-compete agreement applied to a landscaper for several years, a Maryland court might be able to conclude that it is reasonable is if it only prohibited the former employee from working with a single competing landscaping company.
While not discussed in Ms. Morgan-Chandler’s case, the non-compete agreement must also protect a legitimate business interest to be considered reasonable. For instance, if a non-compete agreement prevents a former employee from working with a competitor in any conceivable role, then it will likely be unenforceable, regardless of the time or geographical limitations. A well-trained attorney could help someone identify if their non-compete is reasonable or not.
For More Information About Non-Compete Agreements
Have a question about whether your Montgomery County noncompete agreement is reasonable? Our seasoned lawyers at the Spiggle Law Firm will have experience determining if a Montgomery County non-compete agreement is reasonable. To see how much your case may be worth, click here to check out our Case Assessment Calculator for a no-cost online review.