Digital Signature Licitness for Non-Compete Agreement in European Union

How to eSign a document: digital signature licitness for Non-Compete Agreement in European Union

welcome once again to lato's law here's Steve lato I get asked generalized legal questions from time to time someone asked me Steve non-compete Agreements are they legal are non-compete agreements legal and that is you signed a document contract with somebody saying I won't compete against you for some period of time in some place and later on you have second thoughts is that agreement enforceable can you break it so here's going to tell you that 50 states in America will have slightly different variations of this but in most States the logic the rationale will follow the same thought process that I'm going to explain to you right now so follow along so keep in mind state by state what I'm telling you is not legal advice in your state it's not legal advice in any state I'm simply giving the guidelines the thought process if this actually affects you contact the local attorneys how it is in your area but generally speaking non-compete Agreements are enforceable so long as they're reasonable and what defines how reasonable they are is dependent on a couple things which varies based on the first obvious distinction that is why we're were you asked to sign a non-compete there's two primary places will be asked to sign a non-compete the first one is where you sell a business I have the biggest Plumbing business in town and someone comes along so Steve on a buyer Plumbing business I just I'm gonna pay you some money go away go sit in the beach someplace and I'll take over your plumbing business and I say great and they say it's part of that deal I want you to sign an agreement saying you will not compete against me for 10 years because otherwise I could sell him the plumbing business open up again and say hey I'm back in business people and steal all the business from the business I just sold so a state is going to look at that and go you know something if we don't enforce these agreements that means that people have a hard time selling your businesses because when people sell their businesses they often say it's part of it I won't compete against you it helps you sell your business so if it's a non-compete that you've signed as part of the sale of a business a quartz and look at that and say you know something you got money for that it helped you sell your business we're going to enforce that and I actually know somebody who sold a business that had a seven year non-compete he sold his business and over the next seven years he watched the people who bought his business run it into the ground seven years and a day later he started his business to compete with his old business and promptly boom became huge other business pretty much gone okay but he waited out the non-compete and he had to so the idea is that it helps you sell your business you get money for it but also the two parties are presumed to be sophisticated in an arm's length transaction meaning that you bargained with that you said I'll give you this non-compete in exchange for you buying my business if you didn't want to do it you can't blame them because it's part of the negotiation and that's a big part of this the bargaining position of the two parties here is equal that's one of the things the Court's gonna look at here and say look if you didn't like the non-compete you shouldn't have negotiated it okay so the question then is simply if it's part of the sale of a business a Court's gonna look at it and go you negotiated it you're on the hook for it you're a sophisticated party and arms link transaction live with it and so that type of agreement is going to be allowed to be broader than the other kind and courts are more likely going to enforce it by simply saying if you didn't like it why did you negotiate it okay second the other one that we're talking about is more common and that's the one where you're working for a company and one day they walk in and say hey we want to send a non-compete and hand it to you sign it now it's not uncommon that you walk in on day one and you say I would like a job here and they say oh you want a job here we'll hire you sign a non-compete slightly different positions you're in right there but doesn't mean that the not compete is not enforceable but that is something the Court's going to look at because what happens is when you are asked to sign a non-compete at a business you are working for by your boss or people over you you actually have a little less bargaining power it's not an arm's link transaction and you might feel you have to sign it otherwise you'll get fired or treated less and also the Court's gonna say what did you get out of this what's the consideration now there are some industries that routinely have non-competes that are enforceable that make complete sense so the example I'm going to give you some industry I worked in radio I know radio stations that would hire a morning person and say if we hire you to work here we're gonna sign you to a three-year contract but as part of the contract you promise that if you leave at the end of the three years you cannot work in this market for two more years or one more year this Market and they'll often Define the market and they'll Define the length of time and their position is look in the three years you hear you're going to be on the radio talking about yourself building up an audience but we're going to put up Billboards we're going to do advertising we're gonna do TV commercials we're to put you out in the community we're going to spend three years investing in you so that at the end of your three years you'll be worth more money not just to us but to a competitor so competitor can come along at three years in a day when your contract expires you can cross town and immediately get on the air people will know who you are because we spent three years building you up so a non-compete in a setting like that is usually going to be enforceable as long as the time frame is reasonable and the region is reasonable so if they had you sign a contract and say you cannot work in America for 10 years as a disc jockey that's unreasonable and and the radio station couldn't make the argument say well we made you a star on this Market you know in Michigan therefore you can't go to New Mexico that wouldn't make any sense so I've seen the non-competes in the radio industry and often say in this market or within 50 miles of this of this Market or within 50 miles of the radio station or they'll draw something like that and they'll usually say for a year or two years and it's not uncommon that you will hear about people who are riding out a non-compete because they signed a non-compete they're going to honor it and they just simply have to kill the time until they get the end of the non-compete because they want to stay in that market or whatever so the argument makes sense but um they can't keep you from working so in other words the non-compete is going to have to allow you to make a livelihood so if you sign a non-compete and it says and it's vague let's it's let's just say it's vague you can't work in radio for 10 years presumably you can go to another market and work or someplace else because courts have struck down non-competes that were so broad that they said look if we actually enforce this this person could never work again or they couldn't work for so long that they'd starve to death so they have to allow you to make a living and um so keep in mind again the two primary distinctions here are if it's part of the Goodwill of a business sale courts are more likely going to enforce it particularly as long as it's somewhat reasonable length of time for a particular area okay and and the broader the business by the way the broader the area is going to be suppose that you had a business that serviced a five-state area Court's gonna uphold it if they say you can't compete in those five states even though it's a huge area because that's where you were if your name is known okay so geographically and length of time when it comes to the fact that someone walked up to you and handed you and on compete it was a non-compete you're given at higher a Court's more likely going to enforce it by saying if you didn't want the job you could have just not taken the job but the bigger problem is if you're working someplace you're already there and they walk in and they hand you non-compete and say Here sign this some courts are going to look at that and say what did you get out of signing that what did you gain from that what consideration did you did you gain in contract law okay contract law generally speaking the parties exchange promises but they also exchange consideration and the most obvious contract that I can describe to you is I buy a car from you I hand you cash you hand me the car figuratively speaking so in exchange of consideration so if I sign a non-compete with you what did I get out of it and that's going to be a problem so uh that's one slight thing that will help you if someone asks you to sign a non-compete where you're already employed but the court could look at it and say you're in an at-will state meaning they can fire you at will for any reason so long it's not one of the wrong reasons and theoretically if you refuse to sign it they could let you go but on the other hand they're allowed to let you go so that might be an issue so remember that the two distinctions with whether you're selling a business or whether you're an employee and then the other question is how reasonable is it with respect to its duration and with respect to its region where it's enforced but keep in mind a couple things about non-compete agreements and if you've already signed one this one won't help you but keep in the back your mind if you're ever asked to sign one don't sign it right away ask if you can look at it later and look at it later and call around and an attorney could go through it very very quickly and let you know but you can also research on this and probably figure a lot of this out but what you're going to want to look at is how reasonable it is and you might be able to negotiate parts of it for instance but you never know but one of the other things that you'll often see pop up in a non-compete is where someone goes to sell a business and the owner of the business signs a non-compete and then tries to bind all of his employees to a non-compete but the problem is that if you are simply working at a business and you hear they're about to get sold okay you might go gee I wonder if I still have a job or not okay but if you then get told oh by the way we signed a non-compete and it's going to bind you you go what's this we business did I sign a non-compete so you're going to want to find out whether or not someone's trying to rope you into a non-compete but also keep in mind if you were to go to buy a business and you buy a business and as a sole proprietor who signs a non-compete he's got a bunch of sales people working for him you might need to get non-competes from each of them yourself if you want this to work and you might then have to work with the seller and say look I'll buy the business I need a non-compete from you and from these people here and that might take some extra negotiation because those people might go why we're out of business in three minutes anyways we may have to work for a competitor but also if you are in a situation with a non-compete especially if you're the one who's buying a business and you want to put in a non-compete Clause you're going to want to put in a choice of law it's not uncommon somebody from another state buys a business in this state and the law in this States is one thing in the law in this state says another and at that point it becomes a nightmare and so if someone brings to you a non-competes hey I need you to sign this non-compete read it and see the choice of law says because they might have put a thing that says yeah by the way any thing here is going to be you know be decided by a court in New Jersey under New Jersey Law and you're in Michigan going New Jersey and then finally just a little afterthought here because it's popped into my head but if you are buying a business and you get someone to sign the non-compete uh you're going to want to make sure that the non-compete agreement is assignable meaning that let's suppose three years later you get sick of the business you want to sell it someone comes along they want to buy it and you sell the business to this person well the non-compete agreement might not be assignable with that sale might not be and if it's not this person here when they go into business and discover this person over here just started competing with them they might come back after you and you don't like this finger point especially when I deal with so there you go so non-compete agreements generally are enforceable the primary considerations are first is it a business sale or simply an employer coming to an employee and asking for it and then in both settings still important what's the length of time and what's the region of it but keep in mind that generally speaking Most states allow them and in Most states they are enforceable as long as they are reasonable questions comments put them below let's talk to you later bye-bye thank you for watching lato's Law your computer has crashed I am the blue screen of death no one hears your screams