Sonic Automotive Non-Compete Lawsuit Involves 16 Dealerships

One of the biggest challenges for any business owner is attrition. Losing employees can mean years of experience and consistency walk out the door. Another concern can be where they’ll go when they leave. A lawsuit in Texas alleges that a dealership employee left his job and in violation of a non-compete agreement, eventually brought others with him. According to the Southeast Texas Record, the suit pits Sonic Automotive and Philpott Motors against “Kevin McCabe, Southeast Texas Classic Automotive, Twin City Motors and Twin City Honda, Twin City Classic Automotive, The Beaumont Company, Beaumont Motor Company, Classic Chevrolet Cadillac, Class Buick, Classic GMC, Classic Chevrolet, Cadillac, Buick, GMC, Classic Southeast Texas, Beaumont Direct and Classic Southeast Texas.”

Kevin McCabe worked at Philpott Motors (A Sonic Automotive Dealership) for 20 years. Near what ended up being the end of his tenure there, he attended a leadership conference. McCabe attended “The Leadership Academy 2011.” The training conference was reportedly intended to teach “valuable sonic employees” enhanced skills for the retail automotive industry. In the official legal complaint, the plaintiffs claim that it cost Sonic Automotive $30,000 per employee for this conference. The complaint further states attendees of the conference can’t hire or employ any Sonic Automotive employees till two years after their voluntary termination from a Sonic Automotive Dealership. That non-compete was allegedly violated after McCabe left his position at Philpott Motors after two decades with the company to work at Classic Chevrolet. The complaint alleges that he then hired seven former Philpot Motors employees to work with him at his new store.

There are many reasons for non-compete agreements in the retail automotive sector. Dealerships may want to prevent their best employees from working for a nearby competitor. Perhaps they don’t want their trade secrets to leave their store and be used by another dealership. Especially in an industry with extensive employee turnover, it’s vital for employees and employers to know what the new hire paperwork says. Communication and mutual understanding could in and of itself prevent aggravated legal challenges down the road. What are your thoughts on non-compete agreements in retail automotive? What is your primary reason for having one? What do you think of this particular lawsuit by Sonic Automotive? We will keep you updated on this case as updates become publicly available.