Legal Question in Business Law in Virginia

Re: Did not sign a non-compete with new company

We need to see the contract with your "old" company. Often contracts have clauses that say something about certain provisions surviving the termination. These "survival" provisions are sometimes valid, sometimes not.

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Re: Did not sign a non-compete with new company

We also need to about the exact status of the "dissolved" company. Even though it has stopped operations, it may still exist as a legal entity. On the other hand, there might be no one who has legal standing to enforce the old contract. Also, as my colleague mentions, if the old company is no longer in business, you cannot possibly be guilty of competing with it. But the exact wording of the contract would be relevant as well as whether the old company might say they plan to restart their operations. I'd also like to know if the old company was a corporation, if the contract explicitly says it is with the corporation. The State Corporation Commission can tell you if the corporation has been officially terminated.

However, I think you are more concerned because your current employer was formed out of the old company. This is a little vague. Generally, the two companies legally have nothing to do with each other. Certainly the new company would not admit to paying the debts of the old company, I would imagine. However, perhaps the old company officially reorganized under the new name?

You also ask about a reselling agreement "across the country." It is exceedingly unlikely that any non-compete clause could be binding for the entire country. To be valid, a non-compete agreement must be narrowly focused (based on legitimate business interests) to a particular geographical area and a particular type of business. Such an agreement cannot prevent a person from earning a living entirely, in their chosen profession. So, even if the non-compete is still valid, it cannot cover the entire country, only a specific geographic area. If the non-compete does not provide an identifiable geographic area that can be justified by valid business interests, it may be void entirely for that reason.

Your commission arrangement sounds shaky, in that you can't prove your agreement with your current employer very easily. So be sure to get "paid up" on all of your commissions owed to you before rocking the boat.

Also, you probably need to be more concerned about whether you are using any customer contact lists or trade secrets from your current employer. Or he could SAY you are. He could sue you and be a pain, even if he eventually fails to prove anything. So keep good records and documentation and think clearly about not using any trade secrets of your CURRENT employer in your new business. When you resign, it wouldn't hurt to tell him you will be careful.

Both my colleague answering and I seem to be rather near to you.

It would be worth paying a few hundred dollars to be sure on all of this. After 8 years as an attorney, I went out on my own this year, and not wanting to waste money on a plush office or big staff, I am currently charging only $95 per hour. I do expect this to increase soon, but a little bit of preventative medicine to check this out would be a good idea.

Jon Moseley (703) 850-3733