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The enforceability of non-compete agreements

One question that both employees and employers often have is whether non-compete agreements are enforceable.

Answering that question is not a yes or no matter. Because laws vary from state to state, it really depends on where the non-compete is to be enforced. It also depends on each state's particular requirements for non-competes. Some non-competes may be enforceable, others may not.

One way to look at the issue is from the different perspectives of the employee and the employer. From an employee's perspective, it is wise to inquire whether you will be required to sign a non-compete agreement prior to beginning employment. Employees should, in part, base their decision to take a new job on that fact. The existence of a non-compete agreement could affect future opportunities, since the employee and their future employer are, in most cases, not going to be willing to go to the trouble of striking the non-compete down. It is important to be careful, then, before jumping into a non-compete agreement.

The enforceability of a non-compete from an employer's perspective concerns a number of factors. State statutes and court decisions control whether any particular agreement is enforceable. If a state has no policy against non-competes, their enforceability will depend on whether they are reasonable in scope. Answering that question requires looking into the length of time an employee is prohibited from competing with their former employer's market, examining the geographic scope of restriction, and ensuring that the agreement protects a legitimate business interest.

Some employers choose to require their employers to sign non-competes with questionable enforceability. But employers wishing to impose enforceable non-compete restrictions on their employees should be careful to ensure that they are reasonable, and should consult an attorney who knows how to craft them properly.

Source: Radio Ink, "Non-competes...are they enforceable," Jon Garziglia, 24 June 2011.

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