Most employers forbid employees from competing with the company while they are on the job. But some employers also require employees to agree not to start their own businesses or go to work for a competitor after they leave their jobs with the company. These employers require their employees to sign agreements that say something like “I promise not to compete with the company after I quit or get fired” for a specified period of time. These contracts are called “Covenants Not To Compete” or “Non-Compete Agreements.
- Are non-compete agreements legal?
- Breaching a non-compete agreement
Are non-compete agreements legal? It depends on the state you are in and what the agreement says.
In some states, non-compete agreements are invalid – because those states do not want to prevent their citizens from working for anyone they choose or from opening their own businesses.
Other states allow these agreements, because those states agree with employers who want to protect their businesses from competition from former employees. But even in these states, if the non-compete agreement stops the employee from competing at all, it will probably not be enforceable, because it is unreasonable. For example, if a salesperson has an agreement that says she can never compete with her former employer in any location in the United States, it might be invalid. On the other hand, if the non-compete agreement says that the worker cannot complete with her former employer in the same neighborhood for six months after the job ends, then that would more likely be valid. The bottom line: the less the contract restricts the employee, the more likely it is to be legal.
If you are not sure whether the non-compete agreement you want your employees to sign is valid, you should check with a lawyer who specializes in employment law.
Breaching a non-compete agreement If your employee has signed a non compete agreement and does not want to comply with it, you should contact an attorney who specializes in employment law to find out if the contract is valid in your state.
If the employee (or the “former” employee) violates a valid agreement, you can probably sue the employee and recover the money that you lost because the employee breached the contract not to compete. You might also be able to stop the employee from operating a new business or going to work for a competitor. If your ex-employee has violated the non-compete agreement, you should contact a lawyer immediately.