The Role of Equity in Employment Non-Competition Cases

Abstract

In light of the headline examples of employee poaching and mass defection, the article studies the consequences in litigation between competitors when the sales employees of both businesses are bound by restrictive covenants with the same terms and conditions. Specifically, it will address the availability of equitable defenses to bar a business from challenging the validity of restrictive covenants and, if successful, radically change the law concerning the enforcement of these covenants in the United States.

By tracing the history of the canons of equity over three centuries of jurisprudence, the article explores their applicability in the post-Enron era to thwart unethical business behavior which seeks to exploit a competitor's primary resource— its sales employees. The analysis leavens highly controversial enforceability issues with current debates in ethics, economics, empirical studies, and legal theory. The article concludes by offering guidance in the convergence of law and equity in a way that pragmatically incorporates modern ideas about the role of ethics, the value of human capital, and the economic and social advancement of society.

Keywords: non-compete clauses, non-competition agreements, covenants not to compete, equity, equitable defenses, equitable estoppel, unclean hands, employment non-competition agreements, contracts not to compete