Career tools

The terminators

November 22, 2000
Web posted at: 8:30 a.m. EST (1330 GMT)

In this story:

Nixing non-compete clauses

Pivotal people

Other ways out

Career considerations

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Yesterday: Getting into an employment contract.
Today: Getting out of it.

By Larry Keller
CNN.com/career Senior Writer

(CNN) -- "In most cases, unless you can talk your employer into waiving the contract, you're stuck there," says James Johnston, an employment lawyer in Riverside, California.

"You could be sued for damages if you quit early."

What have you done?

You blithely signed an employment contract when you accepted what you thought would be the job to end all jobs. And now you want out. But belatedly you realize that the contract you signed has placed your future in a straitjacket.

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Ross Runkel, founder of LawMemo.com, says most companies won't sue an employee who's not a top executive after he breaks his contract because they won't recover enough financially to make it worthwhile.

"The reality is the only money the employer is entitled to is how much money they've lost," Runkel says. "If you have a $50,000 employee who leaves early and is replaced by another $50,000 employee, there's no loss. It would only be a loss if the replacement employee cost more. The first employee would be responsible for the difference. The amount of money is typically so small, it's not worth litigating."

But Johnston says the employee who breaks a contract may also be held liable for consequential damages, meaning a loss of business.

"Let's say you were working on contracts for your employer and by your leaving, it caused delays or caused you to lose customers," he says. "You could be sued for those damages. You could also be sued for the cost of recruiting a person to take your place."

Nixing non-compete clauses

One of your best hopes for escaping an employment contract unscathed, ironically, may be in an unreasonable non-compete clause.

Customary regulations "require that the restrictions be reasonable in terms of time and geography," Runkel says. "Sometimes (states) won't allow them at all." California is one such state, Johnston says.

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In Louisiana, non-compete clauses are commonly struck down because there's a presumption that they interfere with free enterprise, says New Orleans employment attorney Dale E. Williams. Employers have a heavy burden in trying to overcome this, he adds

What's a reasonable restriction, of course, is open to interpretation. And to what state in which you live.

"If you have a worldwide business, you may have a worldwide restriction," Runkel says. "If you're running a small restaurant in a small town, then anything outside that town is going to be unreasonable. It will depend on the nature of the business."

Similarly, if your non-compete clause bans you from working at rival businesses for, say, 10 years, you may prevail if the matter goes to court.

"Here in Ohio, it seems like one year is getting to be standard," says Paul Tobias, a Cincinnati employment attorney and chairman of the National Employee Rights Institute. "Anything more than one year, the courts are very reluctant to enforce."

But this time standard varies from state to state. "You can go to another state and they won't bat an eye at five years," Runkel says.

Pivotal people

Geography and time aside, some courts have held that employers must show that the employee who violated a non-compete clause was a key person in the business, meaning someone privy to trade secrets and customer lists.

A Missouri appeals court ruled in favor of a radio personality who was alleged to have violated a non-compete clause in her contract when she quit and took a job at a rival radio station. The court ruled that she wasn't a key employee. It probably didn't hurt, either, that her new station had a different music format from that of her former employer -- or that she used a different broadcast name at her new station and worked a different shift.

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In another media case, the Georgia Supreme Court permitted an Atlanta television meteorologist to work off-camera at a rival station during the term of his non-compete clause, because the clause only prohibited him from working on-air at a competing station.

More often, non-compete disputes are settled before they ever reach a judge or jury, says Tobias. "These cases get settled eventually. Usually on the side of letting the guy work. We try to work out compromises."

Other ways out

Here are some other ways you may successfully escape from an employment contract early:

• Constructive termination. "If your employer makes your working conditions so unreasonable and oppressive and burdensome that no rational, reasonable person could continue working under those conditions, you're considered to be constructively terminated," Johnston says. "You could leave and argue that the employer actually terminated you" by creating such an onerous environment.

Be unpleasant. If your employer is adamant about making you honor the duration of your contract, sulk. Be surly. That's your normal personality? Then ratchet it up a notch. "The reality is, an employer doesn't want to have an unhappy employee around."

— Dale E. Williams, employment-law attorney

• Physical impossibility. You may successfully opt out of a contract if it's physically impossible for you to continue doing the job. This will be harder, however, if the company offers you a different, less physically demanding job -- one that you very well can handle.

• Butter up the boss. If you have a good relationship with your employer, odds are better he will let you out of your contract early, says Williams, the New Orleans lawyer.

• Be unpleasant. If your employer is adamant about making you honor the duration of your contract, sulk. Be surly. That's your normal personality? Then ratchet it up a notch. "The reality is, an employer doesn't want to have an unhappy employee around," Williams says.

• Be ethical. If you do break an employment contract, be sure your conduct is otherwise beyond reproach. "You don't take a stapler, you don't take the computer, you don't take the chair, you don't take the confidential plans, you don't take the secret processes," Runkel says. "Courts look at those as all being the same thing. That looks like theft."

Career considerations

Regardless of the ultimate outcome, there are potential career ramifications if you break an employment contract, especially if you have a non-compete clause.

"What employers do -- if they find out the employee went to work for a competitor -- is they contact the competitor and threaten litigation," says Johnston, the California employment attorney.

This occurs even when the jilted company knows its non-compete clause is not enforceable, Johnson says. "Usually, just the threat of litigation is enough" to deter the second company from formally hiring you, or keeping you if the hire already was made.

"The first thing you've got to do is get your future employer on your side," says Tobias in Cincinnati. Ideally, your new company will pay your legal fees if your former employer does sue, he says. Whether that happens is likely to depend on how badly your new employer needs your services.

It's conceivable, too, that your reputation within your industry could suffer if you break an employment contract. "The employer might say he had concerns about your loyalty, and he'd be telling the truth," says Williams, the New Orleans employment lawyer. That could hurt when a prospective new employer checks your employment history.

Bottom line: Jump if you have to, but make sure your eyes are wide open -- so you can stick your landing.