South Carolina’s unemployment rate has hit 9.5%, and all indications are that it will continue to rise. And as hard as it is for the unemployed to find a job, for too many it is made even more difficult because of a noncompete, which prohibits the unemployed person from working in the field she has the most and/or the most recent experience. The third prong in a court’s evaluation of enforceability is whether enforcement of the noncompete would be “unduly harsh and oppressive in curtailing the legitimate efforts of the employee to earn a livelihood.” As with most questions of fact, context is critical, and it would seem particularly so on this question.

The logic of the argument against enforcement is clear: Unemployment means more people competing for jobs. Skill and experience are generally the most valuable assets someone has to offer a prospective employee, and if an job seeker is barred from seeking employment in the field in which she has the most experience and/or the most recent experience, what are her chances of finding a job? Less for sure. And during a recession, much less.

And in an environment of tightening credit, if an employee does not have access to credit, the scenario becomes more harsh. And even more to the point: When the geographic scope of a covenant not to compete would require an employee to move to get a job, the housing market becomes relevant. Ability to sell one’s home within a reasonable time is critical when you are forced to move to find work.

And, what if the former employee is a budding entrepreneur, not so much scrapped for cash, but simply wanting to start her own business? Should a court consider the fact that a noncompete might prevent job creation in a shrinking job market? The fourth prong considers whether enforcement is reasonable from a standpoint of public policy. And as Congress considers extreme measures to stimulate the economy, should the court be enforcing restraints on trade that stifle economic growth?

These are good questions (if I say so myself), which can be turned into persuasive arguments. I have a case at the moment that I intend to make the argument that this economy makes enforcement of almost any noncompete too harsh and oppressive. Stay tuned.

The law is titled “An Act to Prohibit Restrictive Employment Covenants.” The bill would render unenforceable “any written or oral contract or agreement arising out of an employment relationship that prohibits, impairs, restrains, restricts, or places any condition on, a person’s ability to seek, engage in or accept any type of employment or independent contractor work, for any period of time after an employment relationship has ended.” Those who violate the act would be liable for attorney fees to employees who challenge such an agreement.

The bill is intended to promote competitiveness and attract entrepreneurs to Massachusetts. Perhaps, South Carolina looking to become more “pro-business” may consider following suit. Instead of providing expensive incentives to attract businesses to relocate, legislators could make South Carolina a sanctuary for entrepreneurs. Read more about the Massachusetts’ bill.

Recently, I joined a lawyer message board on LinkedIn called, Non-Compete Lawyers. It appears that many represent those seeking to enforce non-compete agreements. One message thread expressed the general view that non-competes were beneficial and should generally be enforced. This is my response, which contains my ideas about how non-compete law should evolve:

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I disagree. I think non-competes are abused, take advantage of unequal bargaining power, act as a tax on new businesses (litigation expense) and harm the public interest. First, my general view in regards to non-competes in the employment context is as follows:

1. Non-competes should only be enforced, if at all, in the RARE instance when there is a truly compelling interest to protect (preserving customer relationships does not meet this standard in my imaginary fiefdom);

2. I think the way to protect relationships with key employees who represent a real competitive concern is to sign them to term contracts; employees who terminate prior to the end of term may be prohibited from competing under a more traditional contract approach. Otherwise, I would require the employee subject to a non-compete be paid severance during the non-compete period, which in no event should ever exceed 1 year.

3. I would give most significant weight to the public interest and create a presumption that non-competes always against the public interest.

4. There should be no blue-penciling so as to discourage any drafting of overly broad non-competes. And making the signing of an overly broad non-compete a condition of employment and/or trying to enforce such a non-compete should be an unfair trade practice. Remedies under the unfair trade practices act should be available to employees and consumers against those who use and/or attempt to enforce overly broad non-competes.

5. Terminating an employee for refusing to sign a non-compete after employment should constitute wrongful discharge in violation of public policy. (Although it might make more sense to limit this to overly broad non-competes in cases of promotion, where severance is part of the consideration for a non-compete.)

6. Non-competes should never be enforced when an employee is terminated for any reason that does not justify cause. I am new to this group.

As you can guess, I primarily represent employees. I am starting a blog Beat Your Non-Compete, but it is in the early “beta” stage. I cannot recall a non-compete in an employment case that was truly needed. Most are used to protect employers from competition, and seem to rooted in the old Master-Servant view of the employment relationship. Companies do not own their employees’ minds nor their customers businesses.