Noncompete agreements are inherently tricky in a free market system. Companies need to protect themselves against their employees taking information, training and secrets to a rival company. Employees need to protect their right to career advancement. So when a jury in Columbus, Ohio, awarded an insurance company $43.2 million on Jan. 25, because a former executive went to a rival insurance company and aggressively recruited several of his old colleagues, both employees and employers took notice.
Chicago Title Insurance Co. sued its former executive James Magnuson in 2003 for breaching his noncompete agreement and his new employer, First American Title Insurance Co., for inducing him to violate the agreement. According to the complaint in the case, Chicago Title Insurance Co. v. James Magnuson, et al., Chicago Title lost 32 employees over several months to the First American Title's "Talon Group," which hired Magnuson after he left Chicago Title. Chicago Title claimed Magnuson recruited its employees and helped First American Title divert business from Chicago Title between 2002 and early 2003.
When deciding if a noncompete is enforceable, courts will look at the length of the agreement, type of activities it bars and geographical limitations.
"Noncompetes need to be narrowly tailored geographically, protect your core interests and span no more than two years," Carroll says.