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Person X works in startup A. Because reasons he also gets employed in a more established company B. He contributes to A only sporadically and is a full time employee in B. Both are software companies.

X and B have a run of the mill non-compete clause in their contract. The clause prohibits direct or indirect competition. A and X have no such clauses.

Initially A and B are doing completely separate things, but after X has started working in B, B starts switching it's focus into something that is somewhat similar to A, but that aims for a completely different market.

Would the contract prohibit X working in A?

What if later on A also starts moving closer to A and targeting similar markets?

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If your contract says you will not work for a competitor, you cannot work for a competitor. While they were not competitors this was fine, once they became competitors then the person must resign from A in order to comply with their contract to B.

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  • Thanks. As a follow up, let's assume that B does the same thing all along, but A MIGHT end up doing something that could be seen as competition in the future, but this is not the current case or even a plan, just a recognized possibility. Should X resign immediately, when A starts to have immediate plans of competing with them, or when A starts to actively do business in the same segment as B?
    – Seppo420
    Commented Nov 10, 2016 at 12:08

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