There is an interesting case that recently came out of the Dallas Court of Appeals regarding an attorney’s obligation to disclose the existence of a non-compete when he was preparing an independent contract agreement. If you would like to read the full opinion take a look here.
Timothy Brown was a former golf professional who specialized in managing charity golf tournaments. Brown left an employer for Miracle Golf and engaged an attorney to help him with his independent contractor agreement. Brown never disclosed to Miracle Golf the existence of his non-compete. As soon as Miracle Golf found out about the non-compete it terminated its agreement with Brown and sued Brown and his lawyer. The facts didn’t support a claim against the lawyer, because Miracle Golf was already working with Brown well before the formal agreement was signed. There was no reliance, which you have to have for a fraud claim.
The case raises the issue of whether a lawyer has to disclose the existence of a non-compete to the other side when negotiating an agreement? There are all sorts of ethical issues that this raises including the attorney-client privilege and the duties that a lawyer owes to his or her client. There is no one size fits all answer to this question.
As a matter of course, it makes sense for an employee to disclose the existence of such an agreement for a number of reasons including:
- Potential employees should be honest with their potential employer;
- An employer who finds out that an employee has a non-compete and lied about it could very well fire the employee;
- The new employer may have their own legal counsel evaluate the agreement; and
- The new employer may still be willing to hire the employee and defend them if a dispute arises.
Bottom line – be up front with your new employer about the agreement. Only bad things can happen if you don’t. Employers – make sure your new hire checklist includes a question about post-employment covenants. You do not want to hire a lawsuit.