Ability to use noncompete clauses is shrinking — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Ability to use noncompete clauses is shrinking

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Doing business at the speed of the Internet may trim the time you have to restrict former employees from working for competitors.

Mark Schlack signed an employment agreement with EarthWeb, an Internet company that provides services for information technology (IT) professionals, when he became vice president for content on its Web sites. The contract's restrictive covenant barred Schlack from directly competing with EarthWeb for 12 months after leaving the company.

He quit 11 months later. EarthWeb asked a court to block him from working for a company that provides print-based IT information and planned to launch a new Web site.

But the court refused, in part because of the length of the restrictive covenant.

"When measured against the IT industry in the Internet environment, a one-year hiatus from the work force is several generations, if not an eternity," the court said. (EarthWeb v. Schlack, No. 99 Civ. 10035, S.D.N.Y., 1999)

Advice: You should tailor noncompete clauses and other restrictive covenants to protect your interests, but don't infringe upon the employee's future work. In this case, the court noted the agreement made Schlack an at-will employee, offered no severance if EarthWeb terminated him and reserved the company's right to change the terms quarterly. "Read collectively," the court said, "the effect of these provisions is to indenture the employee."

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