EXPERT LEGAL COUNSEL RELATING TO NON-COMPETE AGREMENTS
What is a Non-Compete Agreement?
A non-compete agreement is a contract between an employer and an employee (or sometimes a contractor) that restricts the employee from working for a competitor, starting a competing business, or engaging in similar competitive activities for a specified period and within a certain geographic area after leaving the employer. The purpose is to protect the employer’s business interests, including trade secrets, client relationships, and proprietary information.
Please continue reading to learn more about non-compete agreements.
Questions With Your Non-Compete?
If you have questions related to a non-compete that was presented to you by your employer or would like to know your options relating to a non-compete agreement, contact us today.
ALL ABOUT NON-COMPETE AGREEMENTS
Key Elements of a Non-Compete Agreement
- Restricted Activities:
- Specifies what the employee cannot do (e.g., working for competitors, soliciting clients, or sharing trade secrets).
- Timeframe:
- Defines how long the restrictions apply after the employment ends (e.g., six months, one year).
- Geographic Scope:
- Limits where the employee cannot compete (e.g., a specific city, state, or region).
- Scope of Competition:
- Specifies the industries, roles, or types of businesses covered by the agreement.
- Consideration:
- The employee must receive something of value in exchange for signing (e.g., employment, a bonus, or access to company resources).
When Non-Compete Agreements Are Enforceable
The enforceability of non-compete agreements varies by jurisdiction and depends on whether the agreement is:
- Reasonable:
- Restrictions on time, geography, and scope of activities must not overly limit the employee’s ability to work.
- Protecting Legitimate Business Interests:
- The employer must show a need to protect trade secrets, client relationships, or other valuable business assets.
- Not Against Public Policy:
- Courts may invalidate agreements that excessively restrict an employee’s ability to earn a livelihood.
Industries Where Non-Competes Are Common
- Technology and software development.
- Sales and client-based roles.
- Health care and medical professions.
- Media and entertainment.
Alternatives to Non-Competes
Employers may use other legal tools to protect their interests, such as:
- Non-Disclosure Agreements (NDAs): Prevent employees from sharing confidential information.
- Non-Solicitation Agreements: Prohibit employees from poaching clients or coworkers.
What to Do If You're Asked to Sign a Non-Compete
- Understand the Terms:
- Review the restrictions carefully (time, geography, and scope).
- Consult an Attorney:
- Seek legal advice to ensure the agreement is fair and enforceable.
- Negotiate:
- Request modifications to overly broad or restrictive terms.
- Know Your State Laws:
- Research your state’s stance on non-compete agreements.
What Happens If You Violate A Non-Compete Agreement?
- The employer may file a lawsuit seeking:
- Injunctions to stop you from working for a competitor.
- Financial damages for losses caused by the violation.
- Courts may invalidate overly broad agreements.
Non-compete agreements are powerful legal tools, but they must balance the employer’s need to protect its business with the employee’s right to work and earn a livelihood. It is important to note that non-compete agreements are treated differently from state to state. More on this below.
COMPASSIONATE LEGAL SUPPORT FOR FAMILY MATTERS
Washington, D.C.
In Washington, D.C., the Ban on Non-Compete Agreements Amendment Act of 2020 significantly restricts the use of non-compete agreements for many employees. Effective October 1, 2022, this law renders non-compete provisions generally unenforceable for most workers in the District. However, Employers cannot require or enforce non-competes for employees making less than $150,000 annually. For medical professionals, the threshold is $250,000. There are also clear notice requirements and exceptions to the rule.
Maryland
In Maryland, the enforceability of non-compete agreements depends on several factors, including the employee’s compensation, profession, and the specific terms of the agreement. Importantly, Maryland Courts typically uphold non-competes if the terms are reasonable in scope, duration, and geographic area, and if they protect legitimate business interests without imposing undue hardship on the employee. There are prohibitions for low wage workers and recent legislation further restricted non-competes for certain healthcare and vetrinary professionals.
Virginia
In Virginia, non-compete agreements are generally enforceable, provided they meet specific legal criteria. To be considered valid, such agreements must be:
1. Narrowly Tailored: The restrictions should be limited in scope to protect the employer’s legitimate business interests without being overly broad.
2. Reasonable in Duration and Geographic Scope: The time period and geographic area covered by the non-compete should not impose undue hardship on the employee’s ability to earn a living.
3. Consistent with Public Policy: The agreement should not contravene public policy considerations.
New York
In New York, non-compete agreements are generally enforceable, provided they meet specific legal criteria. To be considered valid, such agreements must:
1. Protect Legitimate Business Interests: The agreement should safeguard the employer’s trade secrets, confidential information, or customer relationships.
2. Be Reasonable in Scope: This includes limitations on duration, geographic area, and the type of employment or activities restricted.
3. Not Impose Undue Hardship: The restrictions should not unreasonably hinder the employee’s ability to earn a livelihood.
4. Not Harm the Public: The agreement should not negatively impact the public interest.
Texas
In Texas, non-compete agreements are enforceable under specific conditions outlined in the Texas Business and Commerce Code. To be valid, such agreements must:
1. Be Ancillary to or Part of an Otherwise Enforceable Agreement: The non-compete clause should be linked to a legitimate contract between the employer and employee.
2. Contain Reasonable Limitations: The restrictions regarding time duration, geographic area, and scope of activity must be reasonable and not impose undue hardship on the employee.
Texas courts generally disfavor non-compete agreements but will enforce them if they are executed for valid consideration and protect the employer’s legitimate business interests.
California
In California, Non-compete agreements are generally unenforceable except in limited circumstances.