Let me begin by explaining that this article does not focus on the janitorial profession and whether non-competes in that profession are enforceable. That’s a topic for another day. Instead, this fourteenth article in The Restricting Covenant series discusses a concept that some courts and litigants refer to as the “janitor analogy” or the “janitor test,” when analyzing or illustrating the overbroad scope of a non-compete provision.

In Any Capacity?

The janitor analogy is most often invoked in cases where the employer’s non-compete agreement prohibits a former employee from being employed or affiliated with a competitor “in any capacity” or “in any manner.”

For example, in Reading & Language Learning Center v. Sturgill (2016), a trial judge in Virginia ruled that a non-compete agreement was overbroad and legally unenforceable because it barred a former speech therapist from contracting with “any current client” for a period of two years, and did not “contain a clause that limits or defines the capacity in which [the employee] is prohibited from contracting.” The judge found that essentially the former employee was prohibited from entering into any contract in any capacity with any company to whom the former employer had provided services, explaining by analogy that the former employee could not “sell them furniture, provide them with cleaning services, or plan any school functions.” Although the former employer argued the non-compete was not overbroad because the parties “understood” its scope was limited to speech therapy services, the judge declined the invitation to consider the enforceability of non-competes based on the parties’ subjective beliefs.

Similarly, in Distributor Service, Inc. v. Stevenson (2014), a federal judge in the Southern District of Indiana ruled that an “in any capacity” provision was unenforceable. The Court stated, “[t]he bottom line is that the plain language of the Non-Compete Provision would prohibit Mr. Stevenson from being an ‘employee’ of any entity who engages in ‘Competitive Business Activity,’ whether he is in sales, works as a janitor, or maintains the second employer’s lawn. Thus, it is overbroad and unenforceable.”

In contrast, a federal judge in the Middle District of Florida in Aerotek, Inc. v. Thompson(2015) rejected the defendant’s “janitor analogy” in support of his argument that his former staffing company’s non-compete was overbroad. The court found that, unlike some “in any capacity” provisions, this non-compete clause limited the scope of prohibited competition to only areas in which the employee had performed services for his employer and about which he had obtained confidential information.

How Broad Is Too Broad?

In the non-compete arena, there is no simple answer to the question: How broad is too broad to be unenforceable? The enforceability of non-competes varies from state to state, from occupation to occupation, and from industry to industry. But, as a general rule, be wary of “janitor clauses.” As one federal judge in Wisconsin described them, “janitor clauses” are provisions that “prohibit employees from taking any position at a competitor, even those unrelated to a current position.” In the context of customer non-solicitation provisions, for example, Wisconsin courts have found that an employer only has a legitimate business interest in protecting the customers with whom the former employee closely worked. Therefore, a non-solicitation provision that would prevent a former employee from soliciting any and all of the employer’s customers, even customers with whom the former employee never met or received any information about, would likely be challenged as overbroad under Wisconsin law.

Recently, a federal judge in the Northern District of Illinois dismissed a complaint against a former employee because the covenant, on its face, restricted the employee from taking any position with another company that engaged in the same business as the employer, without regard to whether the new position was similar to the former employee’s position. Specifically, in Medix Staffing Solutions, Inc. v. Dumbrauf (2018), the non-compete barred the employee from directly or indirectly owning, managing, operating, controlling or being employed by, or participating in or being connected “in any manner” with the ownership, management, operation or control of any company in actual competition with Medix or any company directly or indirectly engaged in the business of providing staffing and recruiting options for clients and candidates across the professional services, life sciences, healthcare and information technology industries. The defendant employee argued that this would bar him from even working as a janitor for another staffing company. While the judge found this example to be “a bit far-fetched,” the court saw “no language in the Covenant that makes it an inaccurate statement of its prohibitions.” The judge declined to modify or “blue-pencil” the covenant and explained, “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.”

Takeaways

First: Beware of the power of the janitor analogy. If you are an employer involved in a non-compete dispute, and a judge or adversary at the injunction hearing invokes the janitor analogy, you must be prepared to explain why that analogy is not applicable to your situation or why the non-compete, as written, is reasonably necessary and appropriately tailored to protect the employer’s legitimate business interest. Otherwise, it could be game over, particularly if you are not in a blue-pencil jurisdiction. See Part 7 of this Series: Blue Pencils and Brokers.

Second: Try to avoid the janitor quandary in the first place. Do you need to include non-compete language that is so broad that it prohibits a former employee from working for a competitor “in any capacity” or “in any manner”? Each situation is context specific and no one size fits all. Perhaps in some situations involving, for example, a high-ranking employee who has full access to the company’s trade secrets, such a broad provision might be necessary. However, for regular employees with no access to trade secrets, broad “in any capacity” restrictions probably are not needed.

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The goal of this Series is to provide a brief overview and some interesting insights and practical pointers when dealing with unique issues that might arise in the context of restrictive covenants. It is not intended to provide and should not be construed as providing legal advice. Each situation is different, including the governing state law, and if legal advice is needed, you should seek the services of a qualified attorney who is knowledgeable and experienced in this area of the law to address your specific issues or needs.