A non-competition agreement is also known as a non-compete agreement. The document may be used when hiring a new employee to an organization or company, and prohibits the employee from working at a competitor, after the employee is terminated or leaves the company. Non-competition agreements are designed to protect a company’s business practices and intellectual property from being provided to a competitor by a former employee. This agreement might be used by a soft drink company to prevent its employees from taking trade secrets to a competitor. A document will usually specify the time length in which the employee promises to not work for a competitor after leaving the company. The geographic territory and any prohibited activities may also be included. The laws surrounding the use and implementation of non-competition agreements may vary from state to state.
But what about actually enforcing a non-compete agreement if you, or your client, has reason to believe that such an agreement has been violated?
Robert M. Shea and Scott J. Connolly write the following in their blog post, Enforcing Noncompetition Agreements:
Employers often ask: ‘Are noncompete agreements enforceable?’ The answer is yes — and no. Courts generally enforce reasonable agreements when necessary to protect particular employer interests. On the other hand, courts generally do not enforce noncompete agreements when no real protectable interests are at stake, the restrictions are unreasonable, or the employer has undermined its ability to enforce them by, for example, engaging in “selective enforcement” of such agreements.
To be enforceable, non-compete agreements, like all contracts, require adequate consideration,” write Judith A. Lockhart and Lawrence F. Carnevale in their piece, Inside: Factors affecting the enforceability of non-compete agreements
According to Lockhart and Carnevale, it is important to note when the employee was asked to sign the non-compete agreement; while it may be standard in some firms for all new employees to sign a non-compete agreement when the position commences, being asked to sign one at a later date may affect how the courts view the scenario. “When the execution of the non-compete comes after hiring, some states will allow continued employment to satisfy the consideration requirement,” write Lockhart and Carnevale. “Some states, however, require the employer to offer additional consideration in the form of a bonus, increased pay or other benefit. In those states, an employee may have a viable defense to enforcement if she was asked to sign the non-compete after she was hired but was not provided any additional consideration by the employer.”
Enforcing noncompete agreement is a highly nuanced area of law that can be complex. The input of a qualified attorney specializing in this area is essential when reviewing an actual agreement and the laws surrounding a potential breach.