Non-Compete Conflict: May Co., Limited Headed To Court Over Executive

May Co. and Limited Brands are scheduled to duke it out in St. Louis County Court Monday over “noncompete” contract provisions.

Federated also has been aggressive about enforcing its non-compete agreements. In one high-profile case in 1993, Federated sued Macy’s when Roger Farah left Federated to join Macy’s as president. Federated’s non-compete provision was upheld by the court, which sidelined Farah from working at Macy’s for several months and made Macy’s pay Farah’s salary while he was benched. Macy’s paid dearly again when Federated took over Macy’s and Macy’s had to pay Farah millions due to a “change of ownership” stipulation in his contract. Federated also once sued Herbert Mines Associates for recruiting Matthew Serra to work for Foot Locker. That case was settled, though Federated made its point.

“The folks who have employed non-competes have achieved their objectives of keeping candidates out of the marketplace,” said Palmer, who, in light of the upcoming Limited-May case, will mail to the industry an essay giving his perspective on the issue. “The time has come for all companies to reexamine and get realistic about defining three major components related to non-competes,” he writes. “We all know Federated competes with May. Restrict non-compete provisions to companies that are obvious competitors.”

Palmer also stresses that after someone has been out of a job for six months, “it’s difficult to believe that anyone can possess such secrets to create substantial and irreparable harm. After this time period, an executive should have the right to go back to work.”

In the first place, non-competes “should be restricted to those who truly have bona fide and highly proprietary information,” which is generally not more than the most senior members of management. “There are too many examples where a company has been downright vindictive to executives, forcing them not to work for years to make their point to the rest of the industry,” Palmer writes. “It’s wrong.”
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