The Attorneys at FMR Have Experience Dealing with Issues Related to Non-Compete and Non-Solicitation Agreements and Other Types of Restrictive Covenants
What Types of Non-Competition Agreements or Other Restrictive Covenants Can Affect an Employee?
Non-compete agreements. A non-compete agreement typically restricts an employee from competing with the employer's business for a set time and/or in a specific geographic area after their employment ends.
Non-solicitation agreements. A non-solicitation agreement restricts an employee from soliciting the business of specific customers of the employer within a set time period.
Non-disclosure agreements. A nondisclosure agreement prohibits an employee from using or disclosing confidential information that belongs to the employer.
While the contents of a non-complete may vary from company to company and state to state, they typically attempt to prohibit the employee from things such as:
• Working for a competitor company or competing individual;
• Starting a company that offers the same products or services;
• Developing competing products or providing competing services;
Similarly, a non-solicitation agreement is intended to prohibit an employee from recruiting former colleagues to join their new business or solicit clients or vendors of their former employer.
Are Non-Compete Agreements Enforceable?
The short answer is it depends, on both the state where the agreement is made to be enforced and the terms of the agreement itself. But in states such as Ohio and Kentucky where restrictions are enforceable, a breach can led to legal action and financial liability against a former employee.
Courts look to several factors to determine if the restrictions are enforceable, such as:
• Is the non-compete agreement needed to protect an employer's legitimate businesses interest, such as confidential business information?
• Does the non-compete agreement have a reasonable time limitation?
• Is the non-compete agreement limited to a specific reasonable geographic location?
• Does the non-compete serve to protect a legitimate business interest of the employer or is it simply trying to prevent an employee from seeking other employment that might be more lucrative or have better working conditions?
• Is the non-compete agreement support by "consideration," meaning does the employee receive some benefit for signing the agreement— like a new job, continued employment, more compensation, or stock options — for agreeing not to work for a competitor?
What Should I Do if I Am Asked to Sign a Non-Compete or some other Restrictive Agreement?
Because non-competes can severely limit an employee’s ability to change jobs by limiting where, when, and for what company or in what industry they can work, it is best for employees to not have a non-compete agreement at all. If an employer demands a non-compete, employees should try to negotiate the terms as much as possible both in terms of its in geographic scope and in its duration. It should also be limited as narrowly as possible with respect to the line of work it covers, so as not to prevent an employee from a whole industry or line of work.
With so much at stake, an employee should consult with an attorney before signing a non-compete or other similar agreement. Guessing wrong about the validity of the agreement or what the agreement covers can seriously affect an employee’s ability to work and have serious financial consequences.
What if I Already Have a Non-Compete?
I you have signed a non-compete, it is a good idea to consult with an attorney before making any job change to get advice on what limits the contract imposes and how to best avoid legal action by a former employer and the financial liability that can go with it. If you have been accused of violating a non-compete of other restrictive covenant it is a good idea to seek legal advice to know if or how the agreement affects your current work situation.
The attorneys at Freking Myers & Reul are experienced with these issues and are here to help.
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