Can I require my employees in my retail outlet to sign a non-compete agreement?
Non-compete agreements are surging in popularity – and for good reason. With the employee-longevity factor decreasing alongside the exciting growth in the private sector, entrepreneurs in virtually every industry are implementing safeguards against the disparaging dissemination of trade secrets and the like. While these agreements are useful and highly necessary in certain industries, the increase of non-compete clauses in areas like hospitality (e.g., restaurants) or retail has some courts raising a skeptical eyebrow – and refusing to enforce the terms in certain instances.
In New York, a non-compete agreement must be reasonable in scope, duration and geographic coverage area. First, a non-compete agreement cannot be so vast that it effectively eliminates the employee’s opportunity to ever make a future living. In the technology space, for instance, an agreement prohibiting the employee from ever working in the IT field again would very likely be unenforceable for having an unreasonable scope.
Secondly, a non-compete agreement must be reasonable in duration and breadth. There are no hard-and-fast rules with regard to the precise number of days or weeks the employee must agree not to compete, but two years has generally been considered the maximum amount of time an employer can impose limitations. Likewise, the employer must impose a reasonable region within which the provisions are enforceable – and cannot prohibit the employee from competing in a geographical area that does not pose a commercial threat to the employer.
Aside from these factors, a non-compete agreement must have a reasonable business purpose. In recent years, courts have seen an influx of agreements within industries like hospitality, dining, and retail – and have declined to enforce these restrictions as unduly prohibitive of one’s right to earn a living. Unless a retail store is engaged in selling highly-proprietary or unique goods that involve some sort of trade secret, restricting employees from seeking subsequent retail employment at a competitor will likely be deemed unlawful.
If you are considering signing a no-compete agreement or already have signed such an agreement, an employment attorney can help you evaluate your rights.