Non Competition Agreement

A non competition agreement, often also called a non compete agreement, is legal in most states though some areas don’t allow them at all. All employment agreeement, including executive employment agreement, may include non competition agreements. Non competition agreements are contracts between an employer and an employee that states the employee cannot enter into business against the employer for a certain amount of time after their employment ends, in a certain geographical area. They also provide protection for the employer for company secrets and tricks of the trade.

For a non competition agreement to be legal and binding it must:

• Really protect the employer’s business interests
• Be reasonable
• Be supported by what’s called consideration—the employee must be given something of value in exchange for the agreement

Requirements of a Non Competition Agreement

It’s clear whether or not the agreement will protect the business interest. The reasonableness of the documents is challenged often, though. A non competition agreement that blindly refuses to acknowledge that after a certain period of time the employee can enter into a competing business in order to a make a living will likely be overturned by the court.

The consideration can be the offer of employment for the person who signs the non competition agreement before employment. For an already employed person, a promotion or additional benefits would be consideration.

How it Protects Employers

Confidential information becomes protected under a non competition agreement (and a confidentiality agreement can take that protection a step further). For the information to be worthy of protection, it must be information that gives the employer a large advantage in the marketplaces or in his field. And it must be shown that the employer has taken steps to try to keep the information secret.

If an employer tries to enforce a non competition agreement in court, the sensitive information and business interests will be measured against how difficult the enforcement would make the former employee’s life, and whether or not it will prevent him or her from gainful employment.

Reasonable in Duration and Scope

If a non competition agreement is deemed unreasonable in duration or scope, the court is likely to throw it out. While a non compete might outline that an employer cannot do business in a certain geographic area, if the area is very large the court might decide to narrow the focus. Any activities in areas where the company does not do business are perfectly available for the ex employee. Also an agreement that forbids you from doing something you must do to make a living, that can be overturned, even though at one time you agreed and signed it.

Though the non competition agreement is a contract and becomes a legal and binding document once you sign it, it can still be challenged if the court thinks the secrets represented within aren’t true industry and company secrets that the employer made every effort to conceal. Also if the length of time outlines or the geographical area are too large and vague, the agreement can be challenged.

Contact one of our experienced employment attorneys in your area today!