Non-compete agreements are usually part of an employment contract or presented upon separation. These agreements prohibit an employee from working for a competitor or engaging in a related business after that employee is separated from his/her employer. A non-compete agreement will, generally, define the period of time for which the agreement will be enforced, limit the prior employee from engaging in certain activities with another employer, and provide a geographic restriction upon the employee. Historically, corporate executives, top sales representatives, and creative personnel were often required to sign non-compete agreements. However, today, employers require employees in various fields to sign non-compete agreements.
Non-compete agreements are usually part of an employment contract or presented upon separation. These agreements prohibit an employee from working for a competitor or engaging in a related business after that employee is separated from his/her employer. A non-compete agreement will, generally, define the period of time for which the agreement will be enforced, limit the prior employee from engaging in certain activities with another employer, and provide a geographic restriction upon the employee. Historically, corporate executives, top sales representatives, and creative personnel were often required to sign non-compete agreements. However, today, employers require employees in various fields to sign non-compete agreements.
Enforcement of Non-Compete Agreements
After a relationship between an employer and employee ends, the employer can enforce a non-compete agreement. The enforced agreement can prevent an employee from working for a competitor in the same market or prevent an employee from starting his/her own business in the same field. In effect, the non-compete agreement will protect employers from previous employees revealing trade secrets or sensitive information including, but not limited to, operations, clients, customers, formulas, and pricing.
When an employee disagrees with the enforcement of a non-compete agreement, that employee can challenge the agreement’s legal validity. There are a variety of ways an employee can challenge a non-compete agreement.
In some circumstances, a breach of an employment contract may render the non-compete agreement unenforceable if a non-compete is part of a larger employment contract, since the employer is required to fulfill all obligations under the contract in order to enforce the non-compete agreement. Thus, if an employer breaches a section of the employment contract, the employee may then be able to challenge the validity of the non-compete agreement. It is important to note that at-will employees may be required to sign a non-compete agreement without an employment agreement.
Other Limitations
Sometimes a non-compete agreement will have no legitimate interest to enforce. The market and/or services included in the non-compete must be limited to the employer’s market. For example, if a restaurant specializes in seafood and its top chef quits and starts working at an Italian restaurant, the seafood restaurant does not have a legitimate interest in preventing the chef from working at an Italian restaurant.
An employee can challenge a non-compete agreement if he/she thinks the time frame is too long. A non-compete agreement will only be enforced for a “reasonable” amount of time. Generally, if a non-compete agreement has a time frame over one (1) year, then the employer has to demonstrate how that specific time-frame is reasonable. In addition, the geographic restriction must be reasonable.
Finally, if the non-compete agreement aims to protect information that is readily accessible to the public, then a court will likely find that the non-compete agreement is unenforceable. The purpose of a non-compete agreement is to protect valuable and confidential work information. For example, if a sales company gets its sales leads from a phone book or a directory, that information is available to the general public and is therefore not protectable under a non-compete agreement.
If you are an employee that has a question about a non-compete agreement, contact Formisano and Company today.