ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Tuesday, July 9, 2013

When Non-Competes Attack

FpasqualeOver at Balkinization, University of Maryland Law Prof Frank Pasquale (pictured) has a post about a recent article by Alana Samuels in the L.A. Times.  Samuels' article begins with the now-familiar story of a janitor owed back wages who was forced into an arbitral forum that favored employers.  His arbitration agreement, which was among the papers he signed without reading (and likely without being given the opportunity to read) on the first day of work, also included a class action waiver.  Employers are also emboldened by the pro-business climate engendered by recent SCOTUS decisions to throw in attorneys' fees provisions, thus increasing the risks to employees who seek redress.

The story then proceeds to detail the plight of relatively low-wage workers, such as limo drivers and hair stylists, whose employers force them to sign non-compete clauses, even if they are part-time, meaning that they cannot find work with other businesses, even if they are not getting enough hours from their current employers.  Pasquale reports that non-competes are now starting to kick in at the job application stage.  He reports that at some job fairs, employers will not look at your application unless you sign a "letter of intent," which prevents the applicant from applying elsewhere whie the current application is pending.

It is not clear to me that such a letter would be or could be enforceable.  What is the company's remedy if a potential employee violates the letter of intent?  Presumably, the only remedy would be to refuse to hire, but if the employer is otherwise inclined to hire someone, would that person's failure to abide by the company's b.s. letter of intent really deter the company from hiring?  And if the company does not decide to hire the person, there is obviously no harm to the company and so no way to enfore the letter of intent.  The issue could arise, perhaps, if the company hired someone and then learned that the employee had violated the letter of intent.  But since the employment is almost certainly at-will, what difference does the letter of intent issue make?  The employer still is free to fire or not fire.


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Such letters of intent and non-competes are unenforceable in California. I imagine such agreements would pass judicial scrutiny in many other states, especially for "blue-collar" occupations.

Posted by: Chris | Jul 9, 2013 10:14:43 AM

Thanks, Chris.

Do you think all of the non-competes described in the article would be unenforceable in CA? I mean, I can see courts directing a hairy eyeball at the "letters of intent," but is it also the case that a CA court would not enforce a non-compete against a hair stylist or a cabby?

Posted by: Jeremy Telman | Jul 9, 2013 11:41:12 AM

With limited exceptions around certain corporate transactions, California law prohibits all non-competes as a matter of public policy, and does not enforce them, even when they originate from outside of California. Cal. Bus. & Prof. Code ยง 16600 et seq.

Many theories give this provision significant credit for Silicon Valley's success, but it applies to any "lawful profession, trade, or business of any kind [...]."

Posted by: Jimmy Kaplowitz | Jul 22, 2013 10:21:11 PM