When an employer asks an employee or new hire to sign a non-compete contract, their goal is supposed to be to protect their business. Unfortunately, many of these agreements are written in a way that is unreasonably restrictive and which prevent employees from being able to move forward with their career or even to earn a living. Non-compete agreements are only enforceable if the court agrees that their terms are reasonable and their prohibitions achieve a legitimate business purpose. Here’s what you need to know before signing a non-compete contract.
- Every state has its own rules regarding the legality and enforceability of non-compete contracts. Some states prohibit them entirely, and others will analyze their terms on a case-by-case basis.
- Employers are not permitted to use a non-compete simply to keep you from working in the same industry or for a competitor. There needs to be a legitimate business purpose for the restrictions stated, including a limit on the duration of the prohibitions.
- If you have confidential knowledge of your employer’s business practices or goodwill established with your employer’s clients, you may be prohibited from taking a job that would jeopardize their competitive advantage.
- Most non-compete contracts specifically limit geographic scope, length of time, nature of duties restricted as well as the industry within which an individual can work. If you choose to leave the company to work for a competitor and your employer attempts to enforce the contract, each of these details will be analyzed to determine what the employer’s “protectable interest” is.
When the court considers whether to uphold the terms of a non-compete contract it will analyze what kind of work the employee does, how long they worked with their previous employer, whether they benefitted from specialized training or knowledge of trade secrets, and whether the knowledge they gained is truly unique to the former employer.
When an employer’s non-compete contract is written so broadly that it effectively prevents employees from being gainfully employed or forces them into a different occupation, it is unlikely that the court will uphold its terms. The best way to protect yourself from being trapped by an unreasonable non-compete contract is to have it reviewed by an attorney prior to your signing it.
If you have specific questions about your rights under a non-compete contract, contact our experienced attorneys today.