Norma
Rea in the 21st Century
Norma Rea. The name conjures an image
of hot, gritty factories with workers toiling long and
hard at their jobs. We see the Industrial Age. We think
of oppressive working conditions, lopsided employment
relationships and trammeled employees rights.
Fast-forward to the present. Now imagine
the new service-based economy. The Internet. Computers.
Technology. A highly mobile workforce. What will Norma
Rea look like today?
She will probably look a lot like Karol
Maw. Like Norma Rea, Karol has sacrificed her job to
expand employment rights for all. Recently, she was
fired for refusing to sign her employer's non-compete
agreement. It just wasn't right. The president of her
company, Advance Clinical Communications, Inc. (ACC),
wanted Karol to agree to restrictions of whom, where,
and how she could work after she was no longer employed.
It was a lot to ask. But often times, an employee really
has no choice. If you want to keep your job, you sign
it. But Karol saw it differently. She saw a choice.
As a matter of principle, she refused to sign.
Karol, a single mother of one, lives in
New Hope, Pennsylvania. By both training and trade,
she is a graphic designer. Karol obtained her Associates
Degree in 1992 from the County College of Morris, N.J.,
working while she went to school. Continuing to freelance,
she graduated magnum cum laude with a Bachelor's of
Fine Art from Trenton State College, now the College
of New Jersey, in 1995. In November of 1997, Karol became
employed as a Graphic Designer with ACC in Lambertville,
NJ. She did well, moving up into a Senior Designer position
in early 2000. She enjoyed both her job and the people
at ACC. All this changed in 2001.
The company presented a non-compete agreement
to their employees to sign. Karol's father, a retired
attorney, suggested some minor changes. The company,
however, refused to budge. They adopted a "take it or
leave it" position. In March, Karol was given four days
to either sign the agreement or face termination. She
saw this as a classic catch-22 situation. If she signed
the agreement, she could keep her job, but lose her
right to work elsewhere in the future. If she didn't
sign, she would lose her job, but retain the right to
work in the future without restrictions. As a matter
of principle, Karol decided she could not sign the non-compete
agreement. Holding true to its threat, ACC fired her
on March 15, 2001.
Restrictive Covenants – Contracts
of Adhesion
Non-compete agreements restrict whom,
when and where you can work in the future after you
leave your job. Employees who sign them may well find
themselves on the receiving end of a lawsuit from their
former employer when they take a new job. Karol's company
wanted her to agree not to work for any competitor or
customer for two years. But the agreement did not clearly
define who would be considered a customer or competitor.
The terms were broad enough to require a court to ultimately
decide these issues. Are non-compete agreements enforceable?
It depends. In New Jersey a restrictive
covenant must meet three hurdles to be enforceable.
First, it must protect an employer's legitimate business
interest. Second, it must be reasonable in scope: duration
and geography. Third, it must not be injurious to the
public's interest. Courts will often modify an overly
broad covenant to the extent necessary but still may
leave many of the restrictions in place. This is referred
as "blue penciling." It is hard to know beforehand
whether a non-compete agreement will be enforced and
if so, to what extent. Presently, the only way to find
out is through litigation after the fact. Therein lies
the problem. It requires costly and time-consuming litigation
to get an answer. The financial costs borne by employees
to fight non-compete agreements are significant. If
sued, an employee has to quickly retain an attorney,
spending thousands of dollars in the hope of being able
to move to the new job. Prospective employers know that
non-competes can cause trouble. Many are not willing
to hire an employee bearing the risk of being sued under
a non-compete agreement even if that agreement might
ultimately not be enforced. As a result, non-competes
place a chilling effect on a former employee's future
job prospects.
In Karol's case, ACC had no legitimate
interest in requiring her to sign a non-compete agreement.
She worked only as a graphic designer and it is difficult
to see what damage ACC would suffer as a result of Karol's
future employment. Thus, Karol was fired for refusing
to sign something that might very well have been found
unenforceable anyway, but she would not know if that
were to be the case until essentially it would have
been too late.
The New Indentured Servitude
Previously, restrictive covenants containing
non-compete agreements have had limited application.
But, the tightening labor market of the 1990's has resulted
in a recent explosion in non-compete agreements, resulting
in a new indentured servitude. Why do companies insist
on using them? There are several reasons. Deterrence
– Maybe the agreement is enforceable, maybe not.
Regardless, it's enough to discourage most former employees
from going to court to find out how far the agreement
reaches. Retention - Non-compete agreements are used
to reduce costly employee turnover. First, it makes
employees unattractive to competitors who shy away from
recruiting workers from another company for fear of
potential lawsuits. Second, employees are afraid to
leave for fear of being held to the harsh terms of the
agreement. Either way, it also makes former employees
virtually unmarketable within their chosen vocation.
Protection –Intellectual property is a valuable
resource. Non-compete agreements are used to protect
companies' former employees from using what they know
or learned while employed elsewhere. However, there
are other much less draconian ways of protecting intellectual
property, such as non-disclosure agreements and confidentiality
agreements.
The Exception
Karol Maw is a rare employee. When presented
with a non-compete agreement, most employees just sign
out of fear of losing their jobs. Not Karol. She decided
to stand her ground and press the issue on the front
end before she signed. There are only one or two other
similar cases in the entire country. For Karol, it's
the principle that matters and that is why she filed
her lawsuit.
Complaint
filed with Superior Court of NJ, Mercer County
Related Links
|
