When workers get sued by their former employer for breaching their employment contract it’s typical for them to argue that the contract was invalid. Eric M. Frieman took a more unusual defense. When Wells Fargo sued him for breach of the noncompete agreement he signed when he began selling insurance for the company, he claimed his signature had been forged.
Frieman’s noncompete agreement stipulated that he could not solicit clients from Wells Fargo to switch to his new employer if he were to leave the company. But in 2016 he did just that (allegedly). His former employer alleged that he wooed 18 of his old clients to switch over to his new employer, RCM&D. USI Insurance Services, the company that bought Wells Fargo’s insurance business, sued Frieman in 2016 for breach of the noncompete clause. Frieman’s defense? That he had never signed the noncompete agreement, because his signature had been forged.
Frieman’s defense rested on a claim that he only signed his name in one distinctive way, an illegible squiggle, and that the more conventional signature on the noncompete form could not be his. It wasn’t easy to disprove Frieman’s claim. He did occasionally sign his name a different way. A handwriting expert testified that the signature he used to sign a deed transfer matched the one he used on the employment contract. The lawyers representing USI convinced the court that he had in fact signed his employment agreement with Wells Fargo, making the contract valid and enforceable.
It would be a funny story about a dubious defense strategy, a variation on the my dog ate my contract defense, if the consequences hadn’t been so steep for poor Frieman. The Pennsylvania state court that heard the case ruled in favor of the insurance company and awarded them $1.7 million in damages, a number arrived at by calculating the total amount of commissions RCM&D received from the clients Frieman (allegedly) persuaded to switch over.
We’d be remiss if we didn’t at this point acknowledge Frieman’s evident sales skills and the strength of his relationships with his clients. While the employer prevailed in this case, noncompete clauses don’t always hold up in court if they are viewed as hampering a worker’s ability to pursue their livelihood. Think of the hairdresser who moves to a different salon and takes her clients with her. In the past no one would have thought twice about her prerogative to do so. But noncompete clauses in employment contracts are on the rise in many fields. Jimmy John’s notoriously tried to prevent its deli workers from switching over to neighboring competitors offering, one assumes, better wages, benefits, or conditions, by having them sign noncompete clauses. The chain was sued by the Attorney General of the state of New York and was compelled by the courts to drop the practice following a settlement.
According to an Economic Policy Institute study of noncompete agreements, which drew on national surveys, about 40% of all employers now use them in some capacity. Larger companies tend to use them more, and higher-earners tend to enter into noncompete agreements more often. As you may have guessed, business, finance, insurance, and real estate services are the industries where noncompete agreements are most prevalent.
Noncompete agreements in U.S. workplaces, by industry
|Industry||Sample size||Share of workplaces where all employees are subject to noncompete agreements||Share of workplaces where any employees are subject to noncompete agreements|
|Finance, insurance, and real estate||31||35.5%||58.1%|
|Education and health||94||28.7%||39.4%**|
|Leisure and hospitality||28||14.3%**||25.0%***|
Source: Original data from national survey of private-sector workplaces, summarized here.
Here in Florida, 39% of all private-sector workplaces require all employees to sign noncompete agreements, and 46% of workplaces have at least some employees who’ve entered into such agreements. Of the 12 most populous US states, that’s about 6% higher than average.
California is an interesting case. At least some employees in 45% of California workplaces are covered by noncompetes, despite the fact that noncompete agreements are unenforceable according to California state law. It’s thought that the California law forbidding Silicon Valley tech companies from using noncompete agreements allows for knowledge spillovers between companies, which has historically fueled innovation. So why such a high rate? The fact is, most noncompete disputes don’t make it to court. The threat of being sued is enough to give most workers pause. The Economic Policy Institute even suggests noncompete agreements could be causing workers to stay in their jobs regardless of the actual enforceability of the agreements.
As for Frieman, who happened to work in a state where noncompete agreements are enforceable and in an industry where noncompetes are more likely to be enforced, he plans on appealing the state court’s decision.
Have questions about an employer contract in Florida? When it comes to noncompete and other contract issues, Drake Law has you covered. We’ll discuss your legal issues and devise a winning strategy for protecting your interests. Call 813-509-2426 to schedule a free consultation, or fill out a quick form by clicking here. We look forward to speaking with you.