Today, noncompete agreements are much more widespread. But it’s important for employees to understand that, despite their prevalence today, they still must meet criteria before they are valid.
According to a recent New York Times article, noncompete agreements today are fairly widespread. The article points out that summer camp counselors, chefs, yoga instructors, and even lawn maintenance workers are now among the list of employees signing noncompete agreements. Given today's 21st century expanding competitive world, it's no surprise that noncompete agreements are seemingly much more prevalent.
However, it's important for employees who have or are asked to sign such agreements to understand that noncompete agreements must meet certain criteria in order to be valid.
What exactly is a noncompete agreement?
A noncompete agreement, also referred to as a covenant-not-to-compete, is often used by employers. Employees are asked to sign this type of agreement when they exit a position (whether through termination or resignation) whereby they agree to refrain from competing in the market typically for a certain period of time. This often includes prohibitions against both working for a competitor and starting a competing business.
Employers utilize such agreements to protect their business interests. They do not want former employees walking off the job with valuable information-like business practices, client lists, or inside product information-and immediately using the information thereafter as an advantage in the marketplace.
But it's important to know that many noncompete agreements are struck down by courts because they are invalid. In order for a noncompete agreement to be upheld, it must be "reasonable" in the eyes of the law.
But what does this mean?
Determining whether a noncompete agreement is reasonable
Essentially, a noncompete agreement is reasonable as long as it's not overly broad. The goal of a noncompete agreement is to protect the legitimate business interest of a company, but also to avoid posing an undue hardship on an employee.
Courts look at various factors to help determine whether a noncompete meets this basic goal such as whether the agreement:
- Stipulates restrictions for too long of a time
- Prohibit actions that are exceptionally far away from the geographic location of the former employer
- Poses extreme difficulty for the employee to earn a living
Depending on the jurisdiction, courts may consider other factors as well.
The help of an employment law attorney
Since every state is different and every situation is unique, consulting with an experienced employment law attorney who understands this intricate area of law is advised. A lawyer can examine specific circumstances and offer guidance that is tailored to individual circumstances.
Keywords: noncompete agreements, reasonable, valid