A non-compete agreement, also known as a covenant not to compete, may seem like a very straightforward contract. The truth is that it is a very subjective type of agreement. This type of document relies on factors and details specific to the situation for it to be enforceable. If the document is clearly written and presents reasonable arguments, the court is likely to uphold the contract.
When reviewing the agreement, you will find it helpful to look for these details as they can determine whether the contract can be enforced:
1. Job restrictions and other limitations
The non-compete needs to explain exactly what the employee’s restrictions are. These may include the following:
· Working for competitors
· Investing in a competitor’s business
· Recruiting the employer’s current employees and/or clients
· Sharing trade secrets and other confidential information
General industry restrictions most likely will not have enforceability. The best course for both parties is to include only as much as needed to protect the employer’s business interests.
2. Time and distance limitations
The agreement must state a defined geographical limitation and period of time the agreement is in effect. Neither can be too broad that it would be difficult for the employee to find local work. The distance must be relevant to the scope of business.
The agreement can include enough time for the employer to recover from any loss, including the employee’s departure, or to protect confidential information. Be aware that the relationship between time and distance affects enforceability. Having a broad geographical restriction and a lengthy time restriction makes the court less likely to enforce the contract.
3. Other relevant information
Beyond the basics, a non-compete may include other information related to the agreement. For example, will the employee receive compensation for signing the contract, and if so, how much? Will the agreement remain in force if the employer terminates the employee? Will the employer give the employee severance pay after termination? The more information the agreement has, the better able the court will be to decide how reasonable it is to enforce.
Check the legality
The legality of your non-compete also will determine its enforceability. Employers must ensure it does not violate any laws, including those regarding taxes, or else they may have to pay severe penalties.
The best way to check the legal strength of your agreement is to consult an attorney with experience in non-compete agreements. An attorney may help you negotiate, draft and review your agreement for increased protection, and can represent you in the event of litigation.
