Freedom Quest: Unlocking Career Shackles
Employment Non-Compete Agreements Can Be Rendered Unenforceable
Hundreds of thousands, if not millions, of working professionals throughout America have signed a non-compete agreement at one point or another during their career - not by choice but rather due to employer job requirements. Often, the bottom line is simple: sign the agreement as-is or forego the job opportunity all-together.
By definition, a non-compete agreements binds the employee to not compete, directly or indirectly, with the employer or work for a competitor after termination of the employment relationship. For courts, however, the definition and enforceability of this document is not so clear-cut. Such agreements are rife with legal loopholes and "gray areas" that are contingent upon the drafting and implementation, which can differ from one employer to another. The merit of these documents can also vary from state-to-state, with some states - but not all - classified as "right to work" territories, rendering some non-compete agreements null and void.
Attorney Jeff Isaac weighs-in on the issue, noting, "Far too many job-seekers do not read or entirely understand the fine print of a non-compete agreement, nor inherently know what constitutes one that is rightful versus wrongful. While it's understandable that employers want to establish a measure of security against unfair competition by former employees, these documents are often far too restrictive with respect to the professional's right to earn income within the industry their skills are most applicable."
How does an employee know if they are, in fact, truly bound and restricted by a non-compute agreement they have signed? Below, Isaac sheds light on some of the many shortcomings that can render a signed non-compete agreement non-enforceable.
Geographic Scope: Non-competes that have too large of a geographic scope are more likely to be denied by the courts. While this is still subjective to the court's opinion on the matter, an argument can surely be made if the region the non-compete agreement covers all-encompassing
Duration: Many states are more likely to void an unreasonable restriction rather than modify it. For example, if a two-year duration is specified in the agreement, and the court considers this duration unreasonably long, it may nullify the restriction entirely rather than upholding it for a shorter duration.
Activity Scope: If the employer has been too broad relative to the activities it is attempting to restrict, than the courts will likely rule in your favor. Often, non-compete agreements are considered unreasonable if the intended scope is beyond that related to the company's direct competitors and established customers or clients.
Consideration of Compensation: Courts are also unlikely to enforce a non-compete agreement if the opportunity for adequate consideration is not provided at the time of signature, so that an informed decision can be made at that time. At the onset of an employment arrangement, the job, itself, is deemed adequate consideration. So, those required to sign a non-compete agreement well after the employment start date, odds are in their favor. And, if the employee is already a part of the organization, the agreement is not likely to be enforced by the courts unless the employer makes it readily apparent that it offered additional consideration - salary increase, improved benefits, etc. - beyond the job, itself, in exchange for what the
State and Local Laws: In some states, non-competes are not legal and will not be supported by the courts. In California, for example, a non-compete agreement is only enforceable with respect to the sale of a business. Employers in this state cannot, however, restrict the livelihood of their current or former employees.
Departure Considerations: Whether or not a court will support it might also depend on why you left the company. For example, if your employer fires you for "good cause" or if you quit to take a new job, it might be enforceable. But If your company fires you or if you resign for reasons beyond your control, such as company-wide layoffs, permanent disability and the like, the court may not enforce a duly signed non-compete agreement. If, however, you have been fired for "good cause" or if you resign to take another job, you may be out of luck.
Isaac concludes, "While some employers know all too well that their non-compete agreement is not enforceable in a court of law, many often require new hires to sign one anyway hoping the employee will not know the document is not legally binding, thus achieving mental servitude, or to otherwise intimidate the new hire in an attempt to protect the company's interests. So, even if you have signed a non-compete agreement, do diligence to see what rights you do or do not have with respect to your specific draft of this so-called employment contract - you may be free of those 'shackles' to seek whatever employment you desire after all."
Copyright ©2007 Auerbach Publications. All rights reserved. Used by permission.