Non-compete agreements. What you need to know.

Non-compete agreements (NCAs) are usually part of an employment contract for new hires. Our friend Dan Goodman shares his expertise in negotiating hundreds of contracts with NCA clauses.

NCAs are intended to protect:

• businesses from unfair competition

• a company’s intellectual property

• from employees taking proprietary information

• from employees starting a competitive business

NCAs require employees to refrain from sharing: Trade secrets, Specialized training, Commercial relationships, Client goodwill, Confidential information.

Every state has different laws regarding NCAs.

CA, ND, and OK as well as DC do not enforce them.

CO, IL, ME, MD, NH, OR, RI, VA, and WA banned NCAs for low-wage workers.

Many expect a federal ban on NCAs to be coming soon. More and more often courts are ruling against employers on NCAs.

Courts consider several issues in determining enforceability.

• The kind of business and # of employees

• Time frame of the NCA restriction

• Geographic area covered by the NCA

• Consideration employee received for signing

• Balance between company and employee rights

Courts enforce NCAs only in exceptional circumstances. NCAs that are not reasonable or overly burdensome are not enforceable.

You can’t limit someone’s ability to earn a living. They also can’t be for an unreasonable amount of time. In MA and OR for example, NCAs can’t be longer than a year.

Most states enforce NCAs even if you are fired without cause. That trend is changing. Some states like IL do not enforce NCA for terminated employees without cause.

Most states consider termination without cause to determine enforceability of a NCA. If they want to limit your ability to work, then pay your salary while you’re not working.

When an employer lets you go, they are often willing to waive the NCA.

How can you get out of a NCA? Prove….

• your employer is in breach of contract

• there is no legitimate reason to enforce the NCA

• the agreement is for an unreasonable period of time

• the confidential information you had access to isn’t special.

You can get out of a NCA by “Proving how severely its terms would affect you.” The inability to make a living could be an “undue hardship”.

Whether it is severance, commission payouts, or healthcare. An employment contract is a two-way contract. A process of give and take as it is with any contract. You can negotiate the terms of your NCA. If the language is too vague or restrictive suggest alternative language. You don’t necessarily need an attorney, but if you can afford one it never hurts. If the employer really wants you, they will negotiate or eliminate it.

Carefully read your employment agreement. Understand the restrictions that are being placed on you.

If you need any help, feel free to email me directly.