Oklahoma non-compete

The Oklahoma non-compete Decision Diagram

While I frequently post about Oklahoma non-compete agreements, I rarely use graphics to illustrate my points. This post is one of those rare occasions. I created this diagram to illustrate the flow and process I might go through in analyzing an Oklahoma non-compete agreement.

The Diagram is by no means a replacement for consulting an attorney but it should provide a glimpse at the issues and decision-making for initial analysis of a non-compete agreement controlled by Oklahoma law. Enjoy.

Decision Diagram

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Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma non-compete

Dissecting the Oklahoma non-compete statute phrase by phrase

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If you have read this blog much, you have heard about Oklahoma non-compete agreements. The primary source of law on Oklahoma non-compete agreements is Title 15 O.S. section 219.A. To make the statute a little easier to read and to use, I am going to do a line by line (and at times phrase by phrase) breakdown of what it says and what it actually means. Let’s start with the text of the statute:

A. A person who makes an agreement with an employer, whether in writing or verbally, not to compete with the employer after the employment relationship has been terminated, shall be permitted to engage in the same business as that conducted by the former employer or in a similar business as that conducted by the former employer as long as the former employee does not directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer.

B. Any provision in a contract between an employer and an employee in conflict with the provisions of this section shall be void and unenforceable.

A person who makes an agreement with an employer. . .
At the heart of most relationships is an agreement and with Oklahoma non-compete law it is no different: the employee and employee must agree, there must be a meeting of the minds and each side must give the other something of value (consideration). Without an agreement, the analysis need proceed no farther.

Whether in writing or verbally. . .
The agreement can (and should) be in writing or could even be verbal. However, it is very difficult to enforce a verbal agreement for the sale of a sofa, much less a restriction on a former employee’s ability to earn a living. Get it in writing.

Not to compete with the employer after the employment relationship has been terminated,
This part targets agreements that wipe out an employee’s right to work in a job or start a business that could cost a former employer money. An agreement doesn’t have to use the word “non-compete” if it has the effect of preventing an employee from working in the field for which he is trained and qualified.

Shall be permitted to engage in the same business as that conducted by the former employer or in a similar business as that conducted by the former employer.
As long as the former employee does not directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer.

B. Any provision in a contract between an employer and an employee in conflict with the provisions of this section shall be void and unenforceable.
Perhaps the clearest language in the statute and remarkably clear and decisive for just about any statute.  A contract that has language that prohibits competition is void and unenforceable. “Void” is important because that means the language is meaningless and no one has to file a lawsuit to prove it. If the statute said “voidable” that usually means someone has to file a lawsuit challenging the language and get an order form the Court acknowledging the restriction is unenforceable.

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Posted by Shawn Roberts in Blogposts, Oklahoma non-compete

Oklahoma Non-Compete Agreements explained

For a term that is used as much as “non compete” I think the details of the agreement and parameters are not well understood. One way I am trying to help in this area is by offering a collection of posts titled “Oklahoma Non-Compete Agreements.” You can find an index to the posts below and watch the video above for a brief explanation of the series.

Over past year I have written several articles about non-compete agreements under Oklahoma law. Below is a collection of the links to each article and a snippet of the article. You can access the full articles from here and also bookmark this page to ensure that you can always access all the articles.

Is my Oklahoma non compete agreement enforceable?
The short answer is that if you are in Oklahoma the non compete agreement it is not enforceable.  With a couple of exceptions, Oklahoma law is clear that an individual is allowed to work in his or her chosen business or industry even if a piece of paper says otherwise.  While competition is allowed, Oklahoma law prohibits a former employee from soliciting the established customers of the former employer.

Two scenarios where a non compete agreement is enforceable
In an article from a few months ago, I wrote about how Oklahoma law categorically invalidates non compete agreements. Oklahoma has made a public policy decision that with a couple of exceptions employees will not be barred from competing. Below are the exceptions to the rule:

Non compete Agreements are still not OK in Oklahoma
I wrote a few months ago about how Oklahoma law prohibits non compete agreements for former employees and touch on exceptions here.  Yesterday, the Oklahoma Court of Civil Appeals reiterated that any agreement which restricts a former employee’s ability to work in the same field as the former employer is void under Oklahoma law.

4 critical points to consider in a non disclosure agreement [before you sign it]
1.      Is the definition of “confidential information” specific enough to be workable?  For the non disclosure agreement to have any value, both sides must understand what is being protected.  I routinely see non disclosure agreements that have wonderfully frightening all inclusive definitions of “Confidential Information.”

Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma non-compete

Two scenarios where your Oklahoma non-compete agreement might be enforceable

In an article from a few months ago, I wrote about how Oklahoma law categorically invalidates non compete agreements. Oklahoma has made a public policy decision that with a couple of exceptions employees will not be barred from competing. Below are the exceptions to the rule that Oklahoma non-compete agreements are barred:

1. When you sell the goodwill of a business. When a business sells their interest in the business including the goodwill, Oklahoma law allows a non compete agreement between the seller and buyer. While “goodwill” is an intangible asset and often difficult to define, in Oklahoma it generally means the “custom or patronage of any established trade or business; the benefit or advantage of having established a business and secured its patronage by the public.”

2. Business Partners splitting up. A non compete agreement is also allowed when a business with multiple owners or partners dissolves.  In anticipation of a dissolution of the partnership, the partners may agree that none of them will carry on a similar business within a specified county and any county or counties contiguous thereto, or a specified city or town or any part thereof.

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Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma Employment Law, Oklahoma non-compete

Non compete Agreements are still not OK in Oklahoma

I wrote a few months ago about how Oklahoma law prohibits non compete agreements for former employees and touch on exceptions here.  Yesterday, the Oklahoma Court of Civil Appeals reiterated that any agreement which restricts a former employee’s ability to work in the same field as the former employer is void under Oklahoma law.

The case is Scanline Medical, L.L.C. v. Brooks.  The restrictive agreement in question absolutely prohibited the former employee from “sell[ing] any medical device product competitive with any of the Spinal Concepts [or Orthovita] Products, or in any way [possessing] a financial interest . . . in any business engaged in the distribution, solicitation, promotion or sale of any medical device product competitive with any of the Spinal Concepts [or Orthovita] Products.”

By completely preventing the former employee from working in his “chosen profession” the noncompete agreement violated Oklahoma law and the Court would not enforce it.  Competition is allowed but an employer can protects it confidential and proprietary information with the right agreements in place.

I work with employers and employees to address non compete agreement issues and put reasonable protections in place to protect both sides.  Please feel free to contact me at sjr@shawnjroberts.com if you have any questions.

Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma Employment Law, Oklahoma non-compete

Is my Oklahoma non-compete agreement enforceable?

The short answer is that if your non-compete agreement is controlled by Oklahoma law the non-compete agreement is not enforceable if it goes beyond the limitations in Title 15 O.S. section 219.A.

The Law

With a couple of exceptions, Oklahoma law is clear that a former employee is allowed to work in his or her chosen business or industry even if a piece of paper says otherwise.  While competition is allowed, Oklahoma law prohibits a former employee from soliciting the established customers of the former employer.  When the Supreme Court of Oklahoma addressed the non-compete issue in 2011 it was crystal clear about enforceability:

Title 15 O.S.2001 § 219A is the Legislature’s pronouncement on Oklahoma’s public policy regarding covenants not to compete. It provides that where an employee has executed a covenant not to compete with an employer, the employee “shall be permitted to engage in the same business as that conducted by the former employer or in a similar business as that conducted by the former employer as long as the former employee does not directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer.” The statute goes on to provide that any provision in a contract between an employer and an employee in conflict with the provisions of the section “shall be void and unenforceable.
¶ 21 Subsection A utilizes the mandatory term, “shall,”in association with the employee’s right to engage in the same or similar business as that of the employer while subsection B provides that “any” provision in a contract between the employer and employee conflicting with those terms “shall be void and unenforceable.” The term “any” is all-embracing and means nothing less than “every” and “all.”The plain, clear, unmistakable, unambiguous, and unequivocal language of 15 O.S.2001 § 219A prohibits employers from binding employees to agreements which bar their ability to find gainful employment in the same business or industry as that of the employer. The only exception allowed by the statutory provision is that the employee may be barred from soliciting goods or services from the employer’s established customers.

Protections for the Employer

An employer who invest its’ resources in training an employee and has shared confidential information with the employee still has ways to protect itself.  A strong employment agreement providing protection for confidential information and trade secrets goes a long way to protect an employer’s interest.

To sum it up, a former employee can compete against his former employer. However, the former employee cannot do it using the employer’s confidential information or by directly soliciting the former employer’s established clients.

If you have questions about Oklahoma non-compete agreements from either the employee or employer perspective, please feel free to email or call me. I have worked with both employers and employees so I understand the issues from both directions.

 

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Posted by Shawn Roberts in Blogposts, Business Law, Oklahoma non-compete