Steven Sack, The Employee’s Lawyer™, recently spoke in an interview with Retail Dive about the Federal Trade Commission (FTC) dropping its ban on noncompete agreements in employment contracts. The discussion came as part of a larger discussion about a high level employee who was blocked from obtaining a position at a rival company, due to a noncompete clause in her contract. The case highlights just how restrictive these provisions can be, even to people with high value positions at major companies.
Corporate Executive Barred From Taking New Position With Competitor
The case being discussed revolved around Yumi Shin, a former Chief Merchant for Bergdorf Goodman who had sought to obtain a position at the company’s rival, Nordstrom. When she attempted to do so, however, Saks Global (the parent company of Bergdorf Goodman) sued to prevent her from taking the position, citing her employment contract’s noncompete clause. In response, she claimed that the contract in question had inconsistent and contradictory terms, due to being repeatedly revised, creating confusion over things such as the appropriate jurisdiction and venue for the case.
The Consequences of Dropping the Noncompete Ban
Noncompete clauses, such as the one involved in this case, might have been illegal under a Biden-era rule that made such clauses that banned them in employment contracts. However, this past September, the FTC conceded to a lawsuit challenging the rule, effectively dropping the ban entirely. As a result, contracts like these are once again enforceable, often to the detriment of employees with these sorts of contracts.
Steven Sack Discusses the Complexity of Noncompete Cases
Steven Sack was interviewed by Retail Dive on the case, highlighting how jurisdictional issues can create problems, especially for companies that operate across state or national lines. “Every case is decided on their own facts,” he noted, and the enforceability of any given noncompete agreement will depend on both its specific wording and the laws of whatever state governs the contract.
However, there are some arguments that could be made to help escape these agreements, even with binding contractual language. For example, some have argued that being forced to be attached to companies with a poor business reputation could be harmful for the employee, making their transfer to another company more reasonable. When asked about this argument, Sack had this to say: “You could argue they don’t have clean hands… But it’s not directly affecting the employee — it’s indirectly affecting them. So I can’t really answer that definitively, but I like the argument.”
What You Should Do if You Have a Noncompete Agreement
If you are an employee with a noncompete agreement, you may have legal options available to you. However, to know what the best thing to do for yourself is, you should speak to a lawyer with experience handling employment law matters. They can help you create a strategy that best suits your needs, and get you the best possible outcome for your circumstances.
