NON-COMPETITION AND NON-SOLICITATION AGREEMENTS
Many employees and contractors are required to sign a non-competition or non-solicitation agreement as a condition of their employment or to receive severance benefits as part of a separation from employment. Because signing the agreement is a condition of employment or to receive much needed pay upon termination, employees often sign without understanding their obligations and future consequences. Don’t let this be you.
What is a Non-Competition (Non-Compete) Agreement?
A non-competition agreement prohibits an employee from competing with his or her employer during employment and usually for a period of time after employment ends. What competing means is laid out in the agreement but generally consists of you working for another company that engages in business that is competitive with your employer during the non-compete period. For example, you might be prohibited from working with another competing company at all, or you might be prohibited from doing so in your same or a similar job. Your agreement likely (and should) also contain a geographic area where the restriction applies. Are you restricted from working within 10 miles of your employer? Anywhere in your State? In the United States? The world?
What is a Non-Solicitation Agreement?
Similar to non-competes, non-solicitation agreements prohibit an employee from engaging in certain conduct or activities for a period of time. But the conduct prohibited is to solicit, or attempt to take away, business, customers or employees of your employer. These agreements are more readily enforced since they do not restrict employee’s ability to work.
Why Do Employers Require These Agreements?
Employers are businesses. Businesses have information that it considers confidential and proprietary and thus invaluable to its success. This information can include unique trade secrets, customer contacts, technology, or strategic plans. Employers seek to restrict employees’ use of the confidential and proprietary information learned during their employment to protect their business interests. Said more simply, employers are trying to protect their ‘secrets for success’ from being used by its competitors. Employers also want to keep their talented workers and avoid a mass exodus when other employees leave.
However, employers often try to ‘overprotect’ their interests, resulting in restrictions on employees that are too broad and not necessary. It makes sense that a company would want to restrict the activities of its departing CEO or scientist who is working on a new therapeutic drug. But does a company need to restrict the activities of a receptionist whose sole job duty was to answer phones? Overbroad and unnecessary restrictions are not generally enforceable.
Don’t Assume Your Agreement is Enforceable
The extent of your restrictions is important in determining whether your agreement is enforceable, or not. Courts in many states have become more and more hostile toward non-competition agreements as employers have broadened their reach and scope, both with the restrictions and the type of employee restricted. Generally, your agreement must be narrowly tailored to protect your employer’s legitimate business interests. Courts evaluate the following three main criteria:
- Geographic area
- Length of time
- Scope of activities restricted
These matters are determined on a case by case basis and are very fact intensive.
Review Your Agreement with an Experienced Attorney
If you need your agreement evaluated contact Swartz Law to speak with an experienced employment lawyer. We can review your agreement, explain your rights and obligations, and negotiate with your employer for lesser restrictions if appropriate. We also represent employees in disputes or against allegations of violations by a employer.