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Does a Noncompete Agreement Really Offer Any Protection

By Staff Report

Oct. 13, 2009


The case of a former Starbucks marketing executive who allegedly violated his noncompete agreement to accept a job with Dunkin’ Donuts may be the best example of one truism: Employees go to work for competitors all the time.


But if a company takes precautions, including a noncompete agreement, appropriate conditional severance and putting competitors on notice, that can’t happen, right?


Well, it did happen, at least according to Starbucks, which is seeking injunctive relief of $75,000, and damages to be determined, from Paul Twohig, who left the company in March and is now brand operations officer at Dunkin’.


According to Starbucks’ filing, Twohig first joined the Seattle java giant in 1996 and left in 2002.


He returned to the company in 2004 on the condition that he sign an 18-month noncompete agreement that, according to the suit, bars Twohig from participating in “management or control of any business which is in direct competition with Starbucks’ business within a 50-mile radius.” Twohig left the company in March 2009 and was given “substantial severance pay.”


At the time, according to the suit, he was senior vice president of retail operations for the Southeast division, with job responsibilities including “formulating business strategies to grow Starbucks business and respond to competitors, including Dunkin’ Donuts.”


Dunkin’ has boldly proclaimed its competition with Starbucks on several occasions, including offering discounted beverages during Starbucks’ closure for its latte retraining session of 2008, and with the “Dunkin’ Beat Starbucks” taste-test campaign, which launched last October and recently returned to the airwaves.


According to the suit, Twohig contacted Starbucks requesting release from the noncompete agreement in August so that he could accept a position at Dunkin’.


Starbucks said it then contacted Dunkin’s senior vice president of human resources, Christine Deputy, who is also a former Starbucks employee, and informed her that Twohig was still contractually bound to a noncompete agreement. Last week, Starbucks uncovered “through periodic internet searches,” it said, that Twohig had accepted a job at Dunkin’.


A call to Twohig’s office was not immediately returned. Starbucks attorney Brad Fisher, of Davis Wright Tremaine, did not immediately return a call for comment.


“We are hopeful that Dunkin’ Donuts and Twohig will unwind this situation,” Starbucks spokeswoman Lisa Passe wrote in an e-mail. “We are open to hearing from them to resolve the situation in a way that protects Starbucks’ interests.”


At least publicly, Dunkin’ wants no part of this.


“Dunkin’ Brands is not party to any lawsuit with Starbucks,” Dunkin spokesman Andrew Mastrangelo said in a statement. “Certainly we are aware of the situation, but we do not feel it is appropriate to comment.”


So what are Starbucks’ chances of prevailing?


A company’s ability to enforce a noncompete, said Larry Drapkin, a lawyer with Mitchell Silberberg & Knupp in Los Angeles, depends a lot on which state you’re in.


Noncompete agreements aren’t usually enforced in California, but they do stand a better chance in Washington state, where Starbucks executed the agreement and filed its lawsuit. It also helps if the employee accepts a hefty severance as part of the agreement, and you’ve put your competitors on notice that the departing executive is under a noncompete agreement.


“The issue of noncompetes [is] huge because there are countervailing pressures,” Drapkin said. “On the one hand, companies are attempting to protect their commercial and competitive advantages, including intellectual property and trade secrets. On the other hand, in many states there are public-policy considerations that are intended to protect the ability of employees to work and take other jobs, and not curtail employment opportunities.”


Ann Brown, a creative recruiter who runs Chicago-based Ann Brown Co., described the Twohig situation as “flagrant.”


“This is flat-out ‘Oh man, you’re crazy if you do that,’ ” she said. “Then again, you can’t prevent someone from working. But if it’s that obvious, it’s really kind of crazy. I’ve known people who have tried to take a job within a competing holding company and had to wait a year to go there.”



Filed by Emily Bryson York of Advertising Age, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.


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