Noncompete clause filters down from executive suite

PORTLAND — Less than a month into new jobs, Sean Mesarich and Scott Beeson received a call that threw them for a loop.

Their former employer was threatening to sue both for violating a noncompete agreement.

Neither recalls signing the one-page pledge. And neither is an executive, doctor or salesman, careers in which the agreements are more of the norm.

"We're just electricians," said Mesarich, 35, who moved from Bend Electric to crosstown rival M&W Electric.

Noncompetes — long a fact of life for top executives and others with access to company secrets — are being used by lower-paying service and blue-collar employers and being enforced by courts in record numbers.

But a backlash may be forming, with critics accusing employers of abusing the agreements and pursuing complaints against workers who have little to do with intellectual property or who didn't leave voluntarily.

No organization officially tracks noncompetes. But research by Shephard Law Group in Boston, which specializes in employment law, recently found the number of published court decisions nationwide involving the agreements grew 37 percent between 2004 and 2006, and jumped 81 percent during the past decade.

Jay Shepherd, who conducted the search, said his finding probably undercounts cases because it doesn't include lawsuits that were settled or sent to arbitration.

"A lot of employers are kind of jumping on the noncompetition bandwagon, and they're trying to take them into professions that they were never used in before," said Mitchell Baker, an attorney at Fisher & Phillips in Portland, who said he has defended welders and air-compressor mechanics who had signed noncompetes.

Typically, the agreements limit an employee from taking a similar job within a specific geographic area for a one- to three-year period.

Laws restricting noncompetes vary significantly across states, but most require that employers set reasonable limits and have a "protectable interest" — a trade secret or a customer list, for example.

Welders, mechanics and electricians all have been sued or threatened with lawsuits for going to work for a competitor, according to court records and attorneys involved.

The Oregon Legislature is considering a bill that would curb use of the agreements by voiding them in the case of a layoff and by requiring employers to disclose them at the time of a job offer.

The proposal, pushed by Oregon Labor Commissioner Dan Gardner, has met resistance from the electronics and insurance industries, as well as from attorneys who represent both sides in contract disputes.

Backers say the agreements are necessary to keep workers from walking off with trade secrets, customer lists or costly training when they leave. The bill Gardner supports, they say, could cause more lawsuits and drive some workers to try to get laid off to get out of their agreements.

"Our agency's value is in the business we build up," said Ron Manza of Stuart & Tunno Insurance Agency in Portland. "We hire local folks. We spend a lot of money to train them. We need the protection of our noncompete agreements."

Others say Gardner's proposal doesn't go far enough and that Oregon should join California in barring them completely. They note California's tech-based economy has prospered despite the ban.

"Noncompetition agreements should be void and nonenforceable across the board," said Nick Fish, an employment attorney with Meyer & Wyse in Portland. "They are illegal restraints on trade and morally wrong."

Defenders of the system say it has inherent checks and balances to protect employees from overly broad agreements.

Judges can rewrite or entirely throw out the agreements. The workers' new employer often pays to defend the case. And employers who enforce them capriciously get a bad rap within their industry, proponents say.

But unlike civil-rights cases, attorneys don't defend workers on a contingency basis, where they get paid only in a victory. That leaves employees or their new employer facing legal bills, attorneys say.