The Janitor Rule Mops Up Another Non-Compete Agreement
The Janitor Rule is a tool used to invalidate non-compete agreements. This rule, also known as the “janitor analogy,” applies to non-compete agreements that are so broad that they would bar employees from even working as a janitor at another company. In other words, the non-compete agreement prohibits employment or affiliation with a competitor in any capacity. While non-compete agreements are permitted to protect employers’ interests, they cannot be unreasonably burdensome on employees or so overbroad as to prevent the employee from working in any job, even an unrelated job, with a competitor. Such an agreement would not be protecting the employer’s legitimate business interests.
An Illinois federal district court recently relied upon the Janitor Rule to invalidate an overbroad non-compete agreement. The court concluded that Medix Staffing Solutions, Inc.’s non-compete agreement with a former director was so broad that it was unreasonable on its face and unenforceable. Med Medix Staffing Solutions, Inc. v. Dumrauf, No. 17-C-6648 (N.D. Ill. Apr. 17, 2018). The court dismissed the case noting it was an extreme case and the judge even refused to modify the agreement because the non-compete agreement was so overbroad.
Daniel Dumrauf was a director at Medix responsible for sales and recruiting strategy in the pharmaceutical, biotechnology, and medical device industries. He entered into a non-compete agreement prohibiting him from gaining employment by any company that worked in the same field as Medix within 50 miles of the Medix office in Scottsdale, Arizona. The non-compete agreement also applied to companies that are not competitors of Medix. In August 2017, Dumrauf resigned from his position at Medix and accepted a position with ProLink Staffing overseeing its Healthcare Division’s operations. While Dumrauf alleged that 90 percent of his activities with ProLink would take place in Ohio and Kentucky, he occasionally worked from ProLink’s office in Arizona, which would be a violation of his non-compete agreement with Medix.
Medix filed suit alleging breach of contract claims. Dumrauf filed a motion to dismiss the case arguing the non-compete agreement was so overbroad that it would prevent him from performing any services for a company that worked in the same field as Medix, even if it did not relate to his prior role at Medix.
The Janitor Rule
One argument raised by Dumrauf was that the non-compete agreement violated the “janitor rule.” In this case, the court concluded that while Dumrauf’s argument that he would be prevented from even working as a janitor at another company was “a bit far-fetched, the Court sees no language in the [non-compete agreement] that makes it an inaccurate statement of its prohibitions.” The court explained that the non-compete agreement would prevent him from not only taking plausible jobs at another company but any jobs for any company in the same business as Medix. The non-compete agreement was unenforceable, and the court refused to modify the agreement because “where it involves a covenant not to compete whose provisions are so broad as to be a ban on competition per se, courts should refuse to enforce or modify the agreement.”
The Janitor Rule can be a powerful tool for employees as a defense against overbroad non-compete agreements. Also, the rule can be useful for employers as a guide when drafting non-compete agreements. Employers should carefully examine their non-compete provisions to ensure they are not prohibiting former employees from working for a competitor, or any company in their field, in any capacity or manner. A one-size fits all agreement may not be appropriate for all situations.
Non-compete agreements are disfavored, and many New York judges and the New York Attorney General recognize the importance of limiting non-compete agreements. New York non-compete agreements must be narrowly tailored and reasonably limited in time and geographic scope, as well as justified by a company’s legitimate business interests. While there may be tactics to beat your non-compete agreement, non-compete agreements may be enforced and need to be taken seriously.
If you are contemplating a non-compete agreement or currently bound by one, you should get a non-compete Review & Consultation. The Ottinger Firm will review your non-compete agreement and meet with you to go over it and discuss your options. We have litigated non-compete agreements in federal and state court and mediated, arbitrated and negotiated hundreds of non-compete disputes. For more information contact our non-compete attorneys at 347-492-1904.