What makes a non-compete agreement enforceable?
Non-competition agreements can offer your business vital protections. A non-competition agreement places restrictions on the ability of employees to work for a competitor after terminating their employment with your company. As business owners and entrepreneurs, you likely rely on non-compete clauses to ensure key employees do not join forces with competitors or start their own competing business. However, you may be surprised to learn that your non-competition agreement may not be enforceable. Our New York City non-compete agreements lawyer at Thomas M. Lancia PLLC explains how you can increase the enforceability of your non-compete agreement below.
Does the non-competition agreement protect your company’s legitimate business interests?
An enforceable non-compete agreement must protect your company’s trade secrets and confidential information, which could include your goodwill, customer lists, and the like. To increase the enforceability of the agreement, your non-compete should specify the interests you seek to protect.
Has the employee received consideration in exchange for signing the non-compete?
Often, non-competition agreements will only be upheld if the employer can demonstrate the employee received adequate consideration in exchange for agreeing to the restrictions. For new employees, mere employment may be sufficient. Existing employees could be compensated in the form of a raise, promotion, or some other benefit.
Are the non-compete restrictions reasonable?
Non-competition agreements will only be upheld in court if the restrictions are reasonable in scope as required to protect your company’s interests. A court will look to the geographic restrictions, duration, and type of restrictions. Non-compete agreements will only be enforced if the geographical region in which the individual may not compete is no more than required to protect the interests of the company. Agreements that attempt to prevent employees from competing across a region of several states, for instance, could be struck down.
Restrictions must be reasonable in duration, with reasonableness varying by state. A period of several months, for example, may be enforced, but restrictions for five years would likely be struck down in most courts. Additionally, courts will look to the scope of the restrictions. For instance, a company that sells computers may restrict a salesperson from selling in the same space, but could not prevent them from working as a salesperson in general. Your non-compete agreement lawyer will work with you to create an agreement that will be powerful and enforceable.