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Consider a hypothetical situation ---
Suppose that my friend, John Doe, works for a large company and that
in order to get
him to work for the company, John was given a significant sum of
restricted shares of
stock in the company as an incentive to get him to work for the
company. The shares
were restricted such that they did not vest for 3 years and John could
not sell
them until they vested. 3 years has almost passed. Now John notices
that in order
for him to accept the shares, he has to sign an agreement. The
agreement was made
available to John long ago, but he didn't pay any attention to it
because he
was told that he'd only need to sign it prior to the vesting date.
Part of this agreement stipulates that John will not, during his
employment
with the company AND AFTER TERMINATION OF EMPLOYMENT work for his
company's
competitors (or their subsidiaries or affiliates) (and this agreement
goes on to
name a long list of other companies that do business in the field in
which John works).
While John thinks it is reasonable for him to agree not to work for
his company's
competitors while he is still employed by his company, he finds the
part saying that
he can never for work the other companies particularly troublesome,
given that
we're talking about his livelihood. I mean, if his company fires him
or lays him off,
can he really never work for these other companies without fear of
getting successfully
sued by his current company? Understand that John has no plans to
leave his current
company, but forever is a long time, and there doesn't appear to be an
end date
attached to this term in the agreement. Certainly John would like to
accept the award.
What thoughts or suggestions would you provide to John?
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Consider a hypothetical situation ---
Suppose that my friend, John Doe, works for a large company and that
in order to get
him to work for the company, John was given a significant sum of
restricted shares of
stock in the company as an incentive to get him to work for the
company. The shares
were restricted such that they did not vest for 3 years and John could
not sell
them until they vested. 3 years has almost passed. Now John notices
that in order
for him to accept the shares, he has to sign an agreement. The
agreement was made
available to John long ago, but he didn't pay any attention to it
because he
was told that he'd only need to sign it prior to the vesting date.
Part of this agreement stipulates that John will not, during his
employment
with the company AND AFTER TERMINATION OF EMPLOYMENT work for his
company's
competitors (or their subsidiaries or affiliates) (and this agreement
goes on to
name a long list of other companies that do business in the field in
which John works).
While John thinks it is reasonable for him to agree not to work for
his company's
competitors while he is still employed by his company, he finds the
part saying that
he can never for work the other companies particularly troublesome,
given that
we're talking about his livelihood. I mean, if his company fires him
or lays him off,
can he really never work for these other companies without fear of
getting successfully
sued by his current company? Understand that John has no plans to
leave his current
company, but forever is a long time, and there doesn't appear to be an
end date
attached to this term in the agreement. Certainly John would like to
accept the award.
What thoughts or suggestions would you provide to John?
If John is located in California, the agreement not to complete would be
unenforceable. Other states have different rules.
McGyver
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McGyver wrote:
If John is located in California, the agreement not to complete would be
unenforceable. Other states have different rules.
Ah, but this is an agreement not to compete in return for
the ADDITIONAL REMUNERATION of the restricted stock.
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McGyver wrote:
Ah, but this is an agreement not to compete in return for
the ADDITIONAL REMUNERATION of the restricted stock.
Additional remuneration is irrelevant. The only exceptions involve
dissolution of a partnership and sale of a business or good will. That's
not one of the listed exceptions to B&P 16600:
16600. Except as provided in this chapter, every contract by which
anyone is restrained from engaging in a lawful profession, trade, or
business of any kind is to that extent void.
16601. Any person who sells the goodwill of a business, or any
owner of a business entity selling or otherwise disposing of all of
his or her ownership interest in the business entity, or any owner of
a business entity that sells (a) all or substantially all of its
operating assets together with the goodwill of the business entity,
(b) all or substantially all of the operating assets of a division or
a subsidiary of the business entity together with the goodwill of
that division or subsidiary, or (c) all of the ownership interest of
any subsidiary, may agree with the buyer to refrain from carrying on
a similar business within a specified geographic area in which the
business so sold, or that of the business entity, division, or
subsidiary has been carried on, so long as the buyer, or any person
deriving title to the goodwill or ownership interest from the buyer,
carries on a like business therein.
McGyver
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"McGyver" <Greyprof@msn.com> wrote in message news:<c4kfmg$2io9ir$1@ID-75195.news.uni-berlin.de>...
If John is located in California, the agreement not to complete would be
unenforceable. Other states have different rules.
McGyver, Thank-you for your reply. John lives in South Carolina.
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