When employees believe they aren’t bound by noncompete agreements, employers often receive little warning when those agreements are about to be violated. Most employees don’t disclose to their employers when they are job hunting, and they may accept new positions without realizing, or having decided there should not be, an issue.
Unfortunately, that means that employers are often taken off guard by an employee’s intention to work at a competitor and have little time in which to formulate a response. The necessary response often involves seeking an injunction against the employee.
This appears to be going on at Walmart. The company has just filed suit to enforce a noncompete agreement against its senior vice president, chief tax officer. Although the woman disclosed that she was considering resigning, Walmart claims it didn’t learn she intended to join Amazon until she actually resigned. Working for one of Walmart’s chief competitors, the company claims, would violate the noncompete clause in her employment contract.
According to Walmart, the noncompete clause its senior executives sign prohibits them from working for any competitor with revenues exceeding $7 billion. The prohibition lasts for two years after the signatory leaves Walmart.
This alleged violation of the noncompete clause could cause significant harm to Walmart, the company says. The chief tax officer has private information about Walmart’s strategic plans, including potential merger opportunities. If she were to reveal that information to her new employer, Amazon could use it either to drive up the costs of those potential mergers or to thwart the deals entirely.
Therefore, the company is seeking a court order enforcing the noncompete clause and barring the former tax executive from using or sharing any confidential information about Walmart. Enforcement of the noncompete clause could mean the former executive would not be able to accept her job offer from Amazon after all.
Would a job with Amazon violate a Walmart executive’s noncompete clause? Walmart certainly considers Amazon to be a direct competitor, and a senior Walmart executive could have access to a great deal of confidential strategic information that Amazon could use to its advantage.
The former executive may choose to dispute Walmart’s claims, however. She might be able to show, for example, that the noncompete clause is too broadly written or unduly limiting. Or, she could argue that Amazon is not the type of competitor the agreement is meant to cover. Or, she might be able to show that she did not have access to any non-public or proprietary information that could be used against Walmart.
The enforceability of noncompete clauses and agreements depends in large part on how they are drafted and whether their scope and breadth are acceptable under state law.