Is a Non Compete Agreement Clause Enforceable

  1. Non-Compete Agreements
  2. Is a Non Compete Agreement Clause Enforceable
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So, you have signed a non-compete agreement. It is enforceable once you leave your employer? You may want to seek advice from an employment attorney. Each state has its own unique laws and rules about whether, when and to what extent a non-compete agreement is enforceable.  Usually the law where the employee works applies even if the company is located in another state where the agreements are enforceable.  The work restrictions in a non-compete agreement usually prevent an employee from working for a competitor in the same market or geographical area usually for one to two years. The agreement can be drafted so broad that an employee could potentially be unable to work in a geographic area.

In determining whether a non-compete is enforceable; a court will review a number of things. The first thing to look at is whether there was some form of payment or consideration for the non-compete agreement. When the agreement is signed at the beginning of employment, courts will usually interpret the non-compete agreement to be part of the overall employment deal and find that there was some fair exchange for the agreement. But when an employer asks an employee to sign a non-compete agreement after starting employment and there is no extra payment or benefit to the employee for signing it, then almost all courts will invalidate the agreement for lack of consideration.

The next thing to consider is the laws of the states involved, where the employer is headquartered and where the employee will physically be working. If either has restrictions against enforcing non-competes, then the agreement may not be effective.

About one-third of states have some restriction on the enforceability of non-compete agreements because they interfere with a person’s basic ability to work and make a living. The restrictions usually limit the geographical area where the employee cannot work for a competitor and limit the time of the non-compete to less than two years. The employer has the burden of showing that any restriction is reasonable and necessary to protect against unfair competition. An employer should make sure the agreement is valid under the law where the employee works before asking an employee to sign.

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