How a Court Determines if Your Prince George’s County Non-Compete Agreement Is Enforceable
Maryland is one of the many states that enforce non-compete agreements. These are unique employment contracts that prohibit an employee from working in competition with a former (and sometimes current) employer. To be enforceable in Prince George’s County, a non-compete agreement must also have reasonable limitations, such as time limits on how long it can be in effect and geographical restrictions.
Companies rely on non-compete agreements to protect their business interests from a departing employee who might take the skills, knowledge, and goodwill created on the job to work for a competitor. But given the potential for abuse and unfairness, courts are careful when enforcing non-compete agreements.
A Maryland court will decide if a particular non-compete agreement is enforceable by conducting a four-part analysis. One particular Prince George’s County employer learned the hard way that these employment agreements must be carefully drafted to meet the four required elements or a court will deem the non-compete agreement unenforceable. Read on to learn more about how a court determines if your Prince George’s County non-compete agreement is enforceable. You may also want to consult with an experienced non-compete agreement attorney at Spiggle Law Firm that could advocate for you.
Allied Fire Protection v. Thai
Allied Fire Protection (AFP) is a company located in Prince George’s County, Maryland that is in the business of installing and engineering fire protection equipment in buildings. In 2006, AFP hired Huy Thai to run the company during the CEO’s absence. Given his level of responsibility, Thai gained intimate knowledge of AFP’s operations.
In 2013, Thai signed a non-compete and nondisclosure agreement which prohibited Thai from directly or indirectly competing with AFP in any similar business for a period of five years after leaving AFP. It also barred Thai from disclosing proprietary AFP information.
In 2014, Thai left AFP and started working for one of AFP’s clients. AFP sued Thai on a variety of legal theories, including breach of the non-compete agreement. The court conducted a detailed analysis of the four elements necessary for a valid Maryland non-compete agreement and found that the agreement did not meet all four requirements. The facts of AFP v. Thai may impact how a court determines if your Prince George’s County non-compete agreement is enforceable. A seasoned lawyer could also help with rewriting an unenforceable non-compete agreement.
Four Elements to an Enforceable Noncompete Agreement
A Maryland court will not enforce a non-compete agreement, unless:
- The employer seeks to protect a legally protected interest
- The agreement is reasonable in that it goes no further than necessary in scope, geography, and duration to protect the employer
- It will not impose an undue hardship on the employee
- It does not violate public policy
Four Elements Applied to Allied Fire Protection v. Thai
In the case of Thai and AFP, the court identified that AFP’s legally protected interest was the goodwill Thai had established with AFP’s current customers. While Thai also possessed confidential AFP information, the court recognized that Thai could not use it at his new job because of the nondisclosure agreement.
However, the non-compete agreement was written in such a broad way that it went well beyond protecting the goodwill that Thai had developed during his tenure at AFP. Specifically, the non-compete agreement prohibited Thai from engaging in any type of work, anywhere in the world, related to fire protection. And it not only restricted him from working with current or past AFP clients but future clients as well. Therefore, the court concluded that the non-compete agreement was unenforceable because it was overbroad and essentially barred Thai from earning a living in the fire suppression business.
It also did not help that the non-compete agreement was to be in effect for five years, a period of time rarely, if ever, upheld by Maryland courts. In fact, AFP’s own attorneys were unable to cite any Prince George’s County court cases where a five-year non-compete agreement was upheld as enforceable.
And while the lack of geographic limitation is not automatically fatal to the non-compete agreement’s enforceability, there must be built-in limitations on geographic scope, such as a non-compete agreement applying to only specific clients. Alternatively, a non-compete agreement with the potential for worldwide application must also be reasonable given the extent of the former employer’s customers and areas of business. Neither situation applied here, so the AFP non-compete agreement was also unreasonable with respect to its geographical reach.
As for the undue hardship requirement, the court understandably found that it imposed such a hardship on Thai. Given how broadly it was written, it prevented Thai from working in the fire suppression business or a related field for five years. This clear undue hardship was also against Maryland public policy.
The non-compete agreement AFP sought to enforce against Thai had little chance of enforcement because it lasted way too long, could apply worldwide (even though AFP did not do business internationally) and prevented Thai from earning any type of livelihood in his chosen profession.
For More Information
Do you believe you may be subject to a non-compete agreement in Prince George’s County and want to learn more about whether is it enforceable? If so, you should consider contacting us at Spiggle Law Firm to see how a court determines if your Prince George’s County non-compete agreement is enforceable. To find out how much your case is worth, click here and check out our Case Assessment Calculator.