RECENT GAO DECISION FURTHER MUDDIES “NON-COMPETE” WATERS

Non-compete agreements are increasingly coming under fire as the administration and employment lawyers seek to minimize their use and nullify their intent.  A recent GAO protest decision, perhaps unintentionally, adds fuel to this fire.  Both companies and workers need to take note of the shifting dynamics.  A recent article by Wilmer Hale appearing in JD Supra discussed the GAO’s decision in Strativia, LLC.   Here, GAO denied a protest that asserted the awardee materially misrepresented who would be available to work on the contract because the employees identified had signed non-compete agreements.  While GAO would not decide on the validity of non-compete agreements, they did offer a sort of litmus test to determine whether the fact that employees from the incumbent company were covered by non-compete agreements truly restricted their ability to go to work for a successor firm.  For the narrow purpose of deciding a bid protest, GAO looked to whether the covered employee had allowed their resume to be used by a competitor.  If so, GAO looked upon that as an indication that the employee intended to go to work for the competing company if they won the next recompete.  GAO also sited a circumstance where an employee not only allowed his resume to be used but accepted a contingent offer of employment.  As GAO explained, the enforceability of the non-compete agreement constituted a private dispute between the project manager whose resume had been used by a potential competitor and Strativia, not a material misrepresentation by the awardee.  While the GAO ruling doesn’t directly impact non-compete agreements, it does potentially reduce their efficacy.  Employers can’t use the existence of such an agreement as proof positive that a key employee will be available.  They could very well be available for a new awardee, as well.  Contractors should review the extensive GAO precedents on this issue and determine whether their internal personnel policies need to be changed.  Keeping key people can be critical to success and, while non-compete agreements can be litigated, few really want to spend the time and money on such matters as they distract from a company’s core business.