Exclusivefocus Summer 2012.pdf - National Association of ...

legal mattersOne Year and One MileUnderstanding the Non-Compete Provisionsof the Allstate R3001 AgreementBy Attorney Dirk BeamerAs every Allstate agent knows, theCompany can terminate theircontract for any reason (or noreason) with 90 days’ notice. And whilea growing number of agents seem tothink life without Allstate is not a badidea, departing agents must keep in mindtheir lingering contractual commitmentsfollowing termination of the Allstaterelationship. A spike in cease and desistletters from the Company over the pastyear suggests Allstate has a renewed interestin monitoring potential violationsof the non-competition provisions of theR3001 Agreement.What are Non-Competes?Covenants not to compete (noncompeteagreements) are contractualarrangements in which one party – typicallyeither an employee or a businessseller – agrees that he will not engage incertain competitive activity to the detrimentof the other party for some specifiedperiod of time. In some jurisdictions,like California, state law restrictsthis type of agreement in the employmentcontext. Other jurisdictions, includingmy home state of Michigan, expresslypermit non-compete agreementsby statute. Virtually every state allowsfor some type of non-compete in thecontext of a sale or transfer of businessassets. Even where they are permitted,these agreements are typically subject tocertain “reasonableness” standards. TheMichigan statute, for example, provides:“To the extent any such agreement orcovenant is found to be unreasonable inany respect, a court may limit the agreementto render it reasonable in light ofthe circumstances in which it was madeand specifically enforce the agreementas limited.”Allstate Agents across the countryoperate under the same non-competeprovisions. But because state laws vary(and because local practice among judgescan also vary), agents should consultwith their attorney if faced with specificquestions or concerns. My goal here is toprovide a general overview of the issuescreated by the Allstate non-compete.What does the Allstate R3001Agreement say aboutCompetition?Section 18 of the contract talks aboutagent “obligations” following termination.Sub-section D states:For a period of one year following termination,neither Agency, nor any of its… employees … will solicit the purchaseof products or services in competition38 — Exclusivefocus Summer 2012