Are non-compete agreements enforceable?
Non-compete agreements are documents that many corporations have used to keep long-time employees from leaving their positions and bringing their insider knowledge to a competitor. However, these agreements are increasingly under fire by government regulators who say they unfairly trap employees and even contribute to practices like wage-fixing.
Keep reading to learn more about whether these agreements are enforceable or even able to stay at all.
Factors that influence non-compete agreements.
As one of the common types of contract clauses, non-compete agreements can be enforceable, but their enforceability often depends on different factors and circumstances like the language used, the employment relationship, and jurisdiction. Assessing every detail is important when writing any contract. Employers and employees should review terms carefully and seek legal advice if concerns exist about enforceability or fairness.
Requirements to make a non-compete agreement enforceable.
Requirements are where non-compete agreements run into their biggest hurdle — to make a non-compete agreement enforceable, it must include the following characteristics:
- Have reasonable time restrictions, typically a year or less
- Be limited to a certain geographic area — think a city or county, not an entire state
- Be “necessary to protect certain employer interests,” including trade secrets and other confidential business information (such as working for KFC and not taking the spice blend recipe to a competing fast-food chain)
- Be “supported by consideration,” which means the employee receives a benefit, like a bonus or stock option, in exchange for not working for a competitor
If a non-compete agreement does not fulfill all these requirements, it is highly likely to be thrown out in court.
How long are non-compete agreements enforceable for?
Non-compete agreements typically mention a duration period when the restrictions are enforceable. This period can commonly range from six months to two years. However, the length of enforceability can vary based on factors such as industry norms, state laws, and the nature of the employer’s business interests.
In some cases, the agreement may allow for discussion of the duration either at the time of signing or during employment negotiations. Both parties should carefully review and understand the details in the agreement and anything else in case of modification.
Is a non-compete enforceable if someone moves?
If someone covered by a non-compete agreement moves to another location, the agreement’s enforceability may vary depending on factors such as its language and the laws of the new jurisdiction.
Non-compete agreements typically have specific geographic restrictions, so relocating outside the area could affect enforceability. Different jurisdictions have varying laws regarding non-compete agreements, which can potentially impact their enforcement after relocation.
So, are non-competes enforceable or not?
The answer is somewhat unsatisfying — it depends. Federal regulators have started to examine these agreements and whether they violate antitrust laws. Many states have passed laws banning them except in specific cases.
To find out if non-compete agreements are enforceable in your area, check with your local laws or hire an attorney who can help you understand whether you can enforce a non-compete agreement. Discover what more you can do with Adobe Acrobat for business to securely execute these and other documents for your own business.