Employment Law Myth Busters – The “Unenforceable” Non-Compete

Man is signing Non compete agreementNon-compete and other restrictive covenants are commonly used by employers in many industries to protect their trade secrets and legitimate business interests.  While employees may be willing to sign them when they take a new position, they are often frustrated by them when it comes time to look for a new job. Some employees take to Google to see if their agreement is enforceable.  What they find on Google often provides them with false confidence that their non-compete or other restrictive covenant is unenforceable, but relying on Google research in the complicated, fact-sensitive legal morass of non-compete agreements is risky business.  True, a Google search can turn up numerous court opinions that express the view that non-competes are viewed unfavorably by courts as anti-competitive restraints on trade and, as such, are narrowly construed and enforced only to the extent that they protect a legitimate business interest of an employer.  However, those cases may or may not be useful in deciding whether your restrictive covenant is likely to be enforced. First, the law governing non-competition agreements varies from state to state. Thus, an opinion by a court in California applying California law (which bars enforcement of restrictive covenants except under specific, narrow circumstances), for example, is of little help in assessing whether a court in New Jersey or Pennsylvania, where non-competes are routinely enforced, is likely to enforce a restrictive covenant under that state’s laws. Making the analysis even more complicated, courts decide whether to enforce restrictive covenants based upon a thorough review of the specific language used in the agreement; even slight variations in the language of the agreement can lead to vastly different results. In addition, because they are viewed as anti-competitive, a court will generally enforce one only if it is well drafted so that its restrictions narrowly target the business interests at issue and nothing more.  The finer points of enforcing restrictive covenants, such as non-competes, are too detailed to address here, but employees with employment agreements that contain restrictive covenants and businesses that are hiring employees subject to them should not rely on Google to assess their enforceability or their liability for a breach.

Savvy employer takeaways: Employers should have an experienced employment lawyer evaluate the enforceability of their employees’ post-employment restrictions and the enforceability of post-employment restrictions by which prospective employees may be bound.  Employers should also require candidates to disclose whether they are subject to any restrictive covenants before offering them employment. 

Questions? Let me know.

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