In contract law, a non-compete clause (often NCC), or covenant not to compete (CNC), is a clause under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition against another party (usually the employer). Some courts refer to these as “restrictive covenants.”
In this context, employers may include an amount that the employee must pay if they breach the non-compete agreement with their employer. Because liquidated damages are part of the contract, the new employer will not have to pay liquidated damages unless they signed a contract directly with the former employer. The potential consequences for violating the non-compete, you should consider whether that non-compete is even binding to begin with. Often, employers take a “kitchen sink” approach to drafting non-compete agreements, seeking to prevent you from any form of possibly competitive behavior.
However, instead of gaining more protection, these employers often get none at all. A valid and binding non-compete must be completely limited in its geographic location, scope of application and timeline. If there is a less restrictive method to protect the employer’s interest, then this is what it should have proposed. Finally, like any contract, a non-compete is only enforceable if you receive something in exchange for signing it and were not under duress. If any of these challenges to the non-compete have merit, a court should not enforce its terms.
However, in those situations where the non-compete was properly drafted and implemented, a court could award damages against you for any actual losses suffered by your employer, or in rare cases, a court will order that you are prevented from working for the competitor for the duration of the clause. Non-compete clauses are a well-known provision found in employment contracts. Non-compete clauses for employees have a reputation for being very difficult for employers to enforce as the Courts often view the specific requirements of the clause to be unreasonable.
A non-compete clause in an employee contract is legal, even in California, which has a law against non-compete contracts, as long as the terms are reasonable. A non-interference agreement basically states that an employee agrees not to disrupt, damage, impair, or interfere with their former employer’s business. A non-compete agreement can limit your ability to work after your employment ends. When you sign the agreement, you give up the right to work for, or start, a competing business. In exchange for your promise, your employer must give you something of value. Otherwise, the contract is unenforceable.