Mediating a non-compete employment case poses different challenges than your run-of-the-mill mediation, although no two mediation cases are completely alike. As I prepared for a Continuing Legal Education presentation for the Mecklenburg County Bar Employment Law Section, where I played the role of mediator in a mock mediation in a non-compete agreement lawsuit, I spent some time thinking about what makes a non-compete mediation different.
Non-Compete Cases Less Focused on the Financials
While most mediations are focused on a financial resolution of a dispute that leads to the parties “talking numbers,” non-compete cases rarely focus on economic loss. This can be good and bad. Numbers are easy to negotiate, but can sometimes lead to unnecessary lines in the sand.
In a non-compete dispute, there are additional levers that mediators can push and pull to try to reach a compromise. For instance, the parties may agree to alter the terms of the non-compete – the time period it covers, the geographic scope, the prohibited role at the new employer or the list of proscribed customers. Or the parties can agree to re-write the agreement in its entirety. This does not mean that there will not be a financial component to the ultimate settlement, it just means that will not be the central focus.
Employer’s Reputation at Stake
For the employer, there are often other, less obvious, interests at stake. For instance, how does it resolve the present lawsuit to communicate to other employees that it will not allow departing employees to breach the covenants in their employment agreements? What are the consequences of having the court determine its non-compete is unenforceable?
On the other hand, an employer may also want to consider the reputational risk of aggressively enforcing a non-compete, which includes risk of damaging its relationships with its customers but also risk of turning away quality prospective employees. And, then there are the often sky high legal fees associated with enforcing non-competes and the associated distraction to management from their daily operation of the business.
Employee’s Career and Livelihood in Jeopardy
For the employee, the stakes are generally high. Lose — and be frozen out of his/her profession of choice for some prolonged period of time (and be faced with costly legal fees). Win — and be allowed to continue to work, while becoming increasingly valuable to the new employer. This can lead to an exceedingly stressful situation for the employee. That is why my advice to any employee with a non-compete even considering changing jobs should consult with a lawyer in order to mitigate the risks of becoming the subject of a lawsuit.
High Emotions on Both Sides
The level of emotion can sometimes be higher because the employer may feel rejected, lied to or betrayed by the departing employee who doesn’t necessarily want to tell the former employer all of the details regarding his/her new employment. Likewise, the employee may feel like “friends” in management at the former employer have now turned their backs on the employee. The former employee may feel singled out when others have been permitted to leave without recourse from the company and that the owner is not giving the departing employing the same treatment he/should would have wanted as an aspiring entrepreneur. Time should be spent by the mediator addressing these emotions, but also ensuring they do not become central to the settlement negotiations.
The Face-to-Face Meeting
From a practical standpoint, I find that opening a mediation with a face-to-face meeting of the opposing parties can be helpful in ultimately resolving the matter. In fact, in one instance, having the parties meet face-to-face gave each of them the confidence that they could trust the party enough to enter into a settlement agreement that would protect each of their interests.