‘JT & Dale Talk Jobs’ is the largest nationally syndicated career advice column in the country and can be found at JTandDale.com.
Dear J.T. and Dale: I sold my business and signed a five-year non-compete. There is one year left. The company is going through bankruptcy. Can I re-open now with 11 months left on my non-compete? — Josh
Don’t Start Over… Restore Your Company
Dale: Another legal issue and another opportunity to invite into the conversation Scott Gordon of the Rodey Law Firm in Albuquerque. He explained “covenants not to compete are used by companies to protect themselves from an employee who joins the company for the purpose of learning the business and its customer base, only to leave, open up shop next door, and steal the business.” However, courts don’t want to deny someone the chance to make a living. So, to be enforceable, non-competes need to be reasonable in scope, especially in time and geography. However, because the covenants are a matter of state law, what is “reasonable” varies by state. Still, Scott offered these suggestions: “If by ‘going through’ bankruptcy, the business is dissolving, it’s highly unlikely the trustee would seek to enforce the covenant not to compete. (If the trustee had sought to assume the contract’s enforcement, Josh would have to be told.) On the other hand, if the business is in reorganization, the trustee of the bankruptcy is more likely to assume the contract and seek to enforce the covenant not to compete.” In other words, it would be wise to know whether or not the trustee has assumed the non-compete.
J.T.: If, Josh, you learn the company is staying in business, I’d go directly to them and see if you can offer your consulting services. Offer to join them again to help restore the health of the business, charging a premium for your work with them. Or, you might be able to buy back the business at a bargain rate. In short, consider looking at this as a way to restore what you once built, as opposed to starting over.
Jeanine “J.T.” Tanner O’Donnell is a professional development specialist and the founder of the consulting firm, JTODonnell.com, and of the blog, CAREEREALISM.com. Dale Dauten resolves employment and other business disputes as a mediator with AgreementHouse.com.
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