Non-compete agreements are everywhere. They are utilized frequently by employers. They are designed to protect business interests. They keep employees from walking down the street after resignation from a job. The agreements are not problem-free. Are they legal? Are they ethical? What are your rights? This article explains the issues.
What is a Non-Compete Agreement?
Non-compete contract is a type of contract. It prohibits an employee from employment into competition. It prohibits the rights of establishing a competing company. It is enacted following the ending of an existing job. It is utilized to prevent unfair competition.
Why Employers Use Non-Competes
Non-competes are used by businesses in an attempt to retain quality assets. Trade secrets are a resource. They are customer lists. They are confidential information. They are unique training. They don’t want them to apply this knowledge. They don’t want them to thrive for another.
Employee Rights: A Balancing Act
Workers are entitled to a living. Workers are entitled to a change of employers. Workers are entitled to working their talent. Non-competes tends to limit these rights. Judges have to weigh employer interests against worker rights.
State Laws: There Are Differences
Non-competes varies from state to state. States are conservative states. States are liberal states. States completely ban non-competes. The state of California is a case in point. One must know your state’s law.
Enforceability: Key Factors
Courts consider some important factors while deciding enforceability. They are the scope of the agreement. They are the temporal extent of the agreement. They are the spatial reach of the agreement. They are the goal of the agreement.
Reasonable Scope: Restraint limitation
The contract should be restricted in nature. The contract should not be boundless. It should not deny an employee a work-life full of career. It should be restricted on the special activities of a specific job. It should be restricted on a particular business.
Reasonable Duration: Time Constraints Do Matter
Reasonable term of agreement. Perpetuity isn’t necessarily the case. It’s not always necessarily unreasonable period of time. Courts would find a one or two year reasonable one way or the other. Any more than that would tend to be litigated.
Reasonable Geographic Area: Where Restrictions Apply
The region to be covered under the agreement should make sense. It should not be for a whole state. It should not be for the entire country. It should be in the region where the employer is operating the business. It should be in the region where the employee was working under the domain of his control.
Legitimate Business Interest: Protection of Valuable Assets
The contract must be enforced in restraint of a legitimate business interest. It must not be enforced to avoid normal competition. It must not be enforced to avoid non-use of general skills. It must be enforced to avoid confidential information. It must be enforced to maintain business relationship with the customer.
Undue Hardiness: Effect on the Employee
Courts consider the impact on the employee. Will the contract disproportionately disadvantage the employee? Will the contract make the employee bankrupt? Will the contract necessitate relocation? These are determiners of enforceability.
Consideration: What the Employee Gets
A non-compete must be supported by consideration. That is, the employee has to be offered something in exchange. It can be a promise of employment. It can be continuous employment. It can be additional training. It can be a bonus.
Negotiating Non-Competes: Negotiating Favourable Terms
Employees can negotiate non-competes. They can demand reasonable terms. They can limit scope. They can limit duration. They can limit geography. They can demand cash.
Beating Non-Competes: Legal Strategies
Non-competes can be taken to court by employees. They can assert that the contract is unenforceable. They can contend it is too broad. They can contend that it puts an undue burden. They can seek a pre-enforcement injunction.
Trade Secrets: Confidential Information Protection
They are statutorily protected. They are less restrictive than non-competes. They protect recipes. They protect procedures. They protect customer lists. They protect trade secrets.
Customer Relationships: Avoiding Solicitation
Non-competes will prevent employees from soliciting customers. They will prevent them from taking customers to a competitor. They will prevent them from utilizing customer lists. These can be quite unreasonable.
Specialized Training: Keeping Investments
Employers wager on details. They would not like the investment broken. They would not like employees using this investment elsewhere. Non-competes will see to that.
The Impact on Innovation: Balancing Interests
Non-competes are suffocating innovation. They might prevent employees from using their know-how. They might prevent them from opening new businesses. Courts have to balance these interests.
Consulting with Attorney: When to Call
Employees need to retain an attorney prior to signing a non-compete. They need to retain an attorney if they believe that the agreement is illegal. They need to retain an attorney if they are being sued.
The Requirement to Be Informed of Your Rights
You need to know about non-compete agreements. It protects your rights. It requires fair treatment. It forbids unfair restraint. Do not sign an agreement without knowing its terms.
Conclusion
Non-competes are bad. They will ruin your career. Learn. Learn about your options. Use an attorney if necessary. Guard your future.
