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A non-compete agreement is a contract, generally between an employer and an employee in which the employee promises not to compete with the employer for a specified length of time after the termination of employment. They are used to prevent employees from using a business's confidential information and otherwise prevent competition -fairly or unfairly- from a former employee.
Requirements
Non-Compete Agreements must be limited geographically and by time duration. If the agreement limits an employee's business or employment interests for an unreasonable amount of time or for a location which is not in competition with the employer, it is highly unlikely that this agreement will be enforced by the courts. There are no specific rules as to how large the geographic or time duration limitations must be. These rules vary depending on the type of job and should be fair to both the employer and the employee.
Employers must clearly define their business. If they state that the employee may not become employed by or engaged in a business that competes with their own, there may be room for debate as to what exactly is the business of the employer.
Who Should Sign a Non-Compete Agreement
It is not necessary for all employees to sign non-compete agreements. All employees who have enough information about a business to start the same or similar business may be required to sign a non-compete or confidentiality agreement. Some of these employees who typically are asked to sign a non-compete agreement include:
- Employees who do research or product development work
- Sales or Service employees who suggest solutions to problems that customers encounter with the business or business's products
- Engineers or drafting employees who do design or engineering work
- Employees who do creative work with trade names, advertising and sales promotion of the business or business products
- Employees in manufacturing, maintenance, and production who oversee or work with the production of machines or other products made by the business
- Employees who have knowledge of the mechanics of products sold by a business
Enforcement of Non-Compete Agreements
In general, non-compete agreements are difficult to enforce because the courts do not look favorably on limiting an individual's choice of employment. Non-compete agreements should be drafted by an attorney who will evaluate applicable state laws. To protect their legitimate business interests, employers should draft these agreements as narrowly as possible.
Reasonable consideration must also be given to employees to ensure that their choices are not unfairly limited for future employment. If employers require non-compete agreements, they should make all employees with similar jobs sign the agreement and they should enforce the agreement by the same standards.
Your Options
If you are drafting a non-compete agreement or have questions about a non-compete agreement you signed, you may benefit from a consultation with an attorney at the Zipin Law Firm.
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