"My noncompete has so. Many. Words."
Every now and again, a veterinarian will submit an employment contract to our office for review, even though he's pretty sure he understands the terms. Sometimes it's because he sees a phrase in the boilerplate that advises him to have a professional review the document. Other times it's just to make sure that the pay and benefits match up against what other employers are paying.
But there's another group of doctors who submit their proposed employment agreements for review. While their contract is relatively clear and concise in every other respect, the noncompetition paragraphs are long, verbose, complex and steeped in legalese. Often I'll consult with a veterinarian who doesn't even have an issue with the noncompete details -- the length of time or the described noncompete region. These docs just can't make heads or tails of the wordy paragraphs and subparagraphs dedicated to noncompetition.
Well, there's a reason why such otherwise clear and concise documents get super wordy in the section describing the covenant against competition. The author has used complex language to build a case in case the enforcement of the noncompete is litigated or arbitrated. How does that work, and why do drafters do this? The answer lies in the politics of jurisprudence.
Let's demystify the court of public policy
Most state laws provide for either the enforcement of employee noncompetition covenants (contractual promises), or they simply don't prohibit their enforcement, which is about the same thing.
For example, Dr. A signs an employment contract that contains a three-year, 15-mile noncompete covenant. When Dr. A violates it, most states will allow his employer to sue to try to enforce the limitation. (Or if the legislature hasn't spoken otherwise, the suit can go forward.)
But that's the simple view. Practically speaking, courts possess enormous leeway to decide whether to enforce a specific covenant. Let's look at Dr. A's case through the eyes of a typical judge interpreting that covenant.
Assume Dr. A is dragged to court for opening his own shop 12 miles from his old employer's clinic. The state law in the fictional state of Jones says that suits are allowed to enforce covenants not to compete. But Dr. A's dispute is not the first case to come before courts in Jones.
In one old case, the noncompete covenant went up on appeal and was held invalid. In its opinion, the Supreme Court of the state of Jones declared that "while the courts of this state may enforce such covenants, they must apply a multipronged test.
"These are the characteristics that a covenant not to compete must possess for the trial courts of our state to mandate enforcement:
> The covenant must be reasonable in terms of period.
> The covenant must be reasonable in terms of distance or region.
> The covenant must cover only an area from which the complaining business draws its customers.
> The covenant must balance the needs of the business to protect itself with the need of the employee to reasonably earn a living in his trade or profession."
Where on earth did the Supreme Court of Jones come up with this set of interpretive rules for the lower courts?
It made the rules up.
It invented them.
And until the Jones legislature says otherwise, those are the rules that all courts in the state of Jones must use to decide whether a covenant is enforceable.
But why? The justices of the highest court of Jones have the duty and power to interpret laws on the books in Jones to allow enforcement consistent with public policy.
That means they say to themselves, "If the people wanted to throw out all noncompetes, their representatives would have made a law." On the other hand, "It would be patently unfair for an employer to be able to prevent a veterinarian from ever working for anybody else in the world for the rest of his life."
The Jones Supreme Court is charged with setting guidelines for interpretation that they feel "are consistent with public policy." Public policy means fair or reasonable or not unduly harsh or some combination of those things.
So let's say one case went up to the Supreme Court. The court said the covenant in that case, 35 miles and one year, was void -- not reasonable because under the facts of that single case, 35 miles is too far.
Now, armed with that precedent, Judge Wright -- the judge in Dr. A's case -- has to apply the "reasonableness" tests to Dr. A's covenant. Well, Judge Wright, raised as a conservative Republican and lover of business people's rights, rules that 12 miles is absolutely fine and falls well within a reasonable balance between the rights of the clinic to protect its client base and the ability of Dr. A to pursue his career. In her opinion, "this noncompete covenant comports nicely with public policy."
But the state of Jones has other judges
Now re-imagine the same trial if the other judge in Dr. A's town were assigned to hear the case. Judge Clinton, a Bernie Sanders guy, is considered liberal by everybody up to and including Ralph Nader. He hears the facts and doesn't buy the theory that Dr. A's old boss has clients driving 12 miles to his practice. The demographic information supplied as evidence leads him believe that virtually all the clients at the practice live within 3 miles of the place.
Surely public policy demands that this poor, innocent vet should be able to work anywhere outside a 3-mile radius. And so the noncompete is struck down or modified to encompass a smaller distance that is reasonable.
Clearly, reasonable minds differ, even about what constitutes "reasonable."
But wait! How does this make for wordy covenants?
Folks who know how to draft legal documents also know what hurdles their work will encounter if the validity of those documents is challenged. So good lawyers anticipate an eventual judicial interpretation of any noncompete they prepare. They write them to enhance their appearance of "reasonableness" and to maximize the likelihood that they will fall on the right side of any "balancing of public policy objectives" a judge may apply.
These are the issues employment contract drafters consider when crafting a well-considered noncompete. The language must not only be descriptive of the prohibition it's designed to enforce, but must be designed to provide a strong defense against any and all challenges to enforceability.
And that, doctor, is why your covenant not to compete is so wordy.