Noncompete agreements signed when someone first takes a job can hang heavy on them when it is time to pursue new employment. But in many instances, they may not carry enough weight to prevent someone from getting a new job in their chosen profession, experts say.
Many, if not most noncompete agreements will not hold up in court because they are overly broad. The easiest way to know for sure is to speak to a lawyer who specializes in this realm and get them to review your agreement. Laws in every state are different.
One in five workers are bound by noncompetition and non-solicitation agreements, according to Market Watch. These agreements are designed to protect employers from unfair competition. While they were once limited to CEOs and top professionals, that is no longer the case. These agreements are now used for many jobs, from janitor to hair stylist to receptionist or salesperson. Some 15% of employees who make less than $40,000 per year are bound by these agreements.
“A noncompete prevents an employee from working for an employer’s competitor or starting a competing business for a set period of time, typically between one to two years, and within a designated geographic area, such as within a city or county limit,” Market Watch reports. “A non-solicitation agreement is slightly different: it prevents the employee from soliciting business from the employer’s customers or soliciting the employer’s other employees to join the competitor, typically for the same time period as the noncompete. These agreements also prevent an employee from taking the employer’s valuable information, including its trade secrets, customer lists and pricing information.”
Know your rights and if necessary, find a lawyer that can walk you through the process or help you once you are terminated.
Many states limit the enforceability of a noncompete agreement so they are not overly limiting, since they can make it quite difficult for a former employee to find new work. In Maine, broadcast personnel are exempt from noncompete agreements. In Missouri, clerks and secretaries have limited exemptions. And in New Jersey, in-house counselors and psychologists are protected from these agreements.
Noncompete agreements are simply not allowed in Oklahoma. In Colorado, physicians are exempt and these agreements are generally not enforceable.
Many states also have policies that limit such agreements to only certain professions. This helps ensure that professionals vital to a state can find work at comparable pay without moving elsewhere.
“The most important thing is that there are judges in courts, like here in North Carolina, who don’t like them,” said Drew Richards of Copeland Richards in Davidson, NC. “They’re kind of disfavored in the law. They have to be very carefully and very narrowly written so they actually protect the employer’s business interest, but not overly broad. Those I see are most likely unenforceable. I would advise anybody to be careful about reading them, but it ultimately comes down to a judge’s interpretation as to whether it is enforceable or not. You could still get sued by your employer.”
People constantly ask Richards to review their noncompete agreements when they want to leave a job or they have just left one, he said.
“Most are unenforceable on their face because they require the exiting employee to never have any contact with anyone connected with the business. It has to be someone you were actually doing business with and by you trying to take them, you could do legitimate business harm.”
Things are different in Texas, where Eddie Hodges practices employee law.
“Typically, here in Texas the courts are more noncompete friendly,” said Hodges, with Kennard Attorneys at Law. “They will construe the noncompete more favorable for the employer. It typically is harder to justify a breach without certain facts. It can be contingent on employment. The laws are situated so employers can protect themselves from competition or confidentiality.”
Noncompetes in Texas are used a lot in the sales industry, he said.
“That’s kind of the main industry I have seen, along with some high-tech companies. For sales, it’s about competing with the same companies selling the same products.”
The way the legal process works, he said, is that clients come in with their agreement when they want to go to another employer.
“We read their agreement and see if it is reasonable in scope or time and whether the restrictions are reasonable,’’ he said. “If any of those elements are not met, we could sue the company saying it is not reasonable and not valid. It would go to state court and we would present the evidence showing it is an invalid agreement.”
Do not steal company secrets or the customer list
Protect yourself from lawsuits. Even if you think you have covered your tracks, a computer forensic exam can show that you heisted confidential information, said Patrick Causey, with Trenam Law in St. Petersburg, FL.
“The best approach is to err on the side of caution and avoid sending direct or targeted messages to customers or former work colleagues about your new job, whether on social media or otherwise,” he told Market Watch.
“My counsel to folks if they have left a company, have somebody look at the agreement who understands noncompetes,” Richards said. “Determine if it is overly broad. Anybody can get sued for anything, so even if you have a clear sense it is non-enforceable it is still possible for you to get sued. It is important to have communication back to the former employer. Very often, the parties can work out a resolution where they can carve out a length of time and determine specific customers you won’t talk to. Most employees don’t have money to go the distance in protracted litigation. Here, 95% of them settle before trial anyway.”
Laying out a specific list of customers you will agree not to contact can resolve this issue in many instances, he said.
But in the beginning, make sure the noncompete agreement is as narrow and limited as possible, in both geography and length of time. In negotiating before signing, ask for severance. That severance could run for a short time or for as long as the restricted time required in the agreement, Hodges said.
Sometimes just having clear communication with your boss on what you plan on doing when you leave a company’s employ is better than no communication, Richards said.
“Employers will assume the worst, that you have stolen their property and plan to go start a new business,’’ he said. “Calm things down before it gets to the point where lawsuits are filed.”