What is a Non Compete Agreement
When an individual starts a position in the workforce, he or she is often required to sign a contract with his or her employer. This document generally outlines the employee’s pay, benefits, and in some cases, confidentiality and non-compete agreements. A non-compete, also called a "non-competition" clause, is an employment contract between an employee and employer and typically prohibits the employee from entering into or starting a similar profession or trade in competition with the employer’s business for a specific period of time after leaving the job.
A non-compete agreement helps protect the employer’s interest and, as a result , there are certain requirements that these contracts must follow in order to be valid. For example, in order for an employer’s non-compete to be enforceable, a worker generally must be offered something in return for signing it such as a salary raise or job advancement. Additionally, a non-compete can only be enforced if it comes with geographical and time limitations. The courts have said that if a non-compete clause is too broad the document isn’t enforceable. For instance, if a non-compete seeks to stop a worker from working for any company in his or her field within the state, the non-compete is likely unenforceable because the geographical area is too broad.
Is the Non Compete Enforceable?
Your ability to break free from a non-compete agreement depends on whether the court will enforce the agreement. The analysis necessary to assess whether a non-compete agreement is enforceable often varies based on the state in which it will be enforced.
In Illinois, for example, courts may void a non-compete agreement if the employee can demonstrate that the employer terminated their employment before the non-compete began, unless the non-compete agreement was in effect for a sufficient amount of time after termination for the employee to "get a foothold" on the market and create customer relationships. On the other hand, if the employee quit, the general rule is that non-compete agreements (assuming other requirements are met) remain valid and enforceable through the relevant time period of the non-compete agreement. Thus, the validity of a non-compete agreement can depend on the circumstances that led to the employee’s termination.
If a court does decide to enforce a non-compete agreement, courts usually analyze whether the non-compete agreement should be enforced using a three-part test that considers the following:
Even if you can convince a judge to void your agreement, this will not prevent a judge from issuing a temporary injunction. So it is important to seek the advice and counsel of an attorney to determine the right course of action for you.
Are There Any Loopholes?
Courts recognize that some non-competition agreements are drafted broadly and can end up imposing restrictions beyond the normal course of events. For crafty plaintiffs, this presents a loophole for attacking the agreement. For instance, Illinois courts recognize that a covenant not to compete with "any customer of [Plaintiff’s company] for whom [Plaintiff’s company] had made a sale" is unenforceable against an employee who has no access to customer information. Also, provisions that specifically seek to restrict post-termination solicitation of an employer’s customers have been recognized as legally valid to restrict conduct following the termination of employment. Additionally, a blanket clause restricting "any employment or association whatsoever" with any competitor has been held to be overly broad and therefore unenforceable. These and other loopholes are vital in developing strategies for defeating overreaching non-competition agreements.
Negotiating with Your Company
It may seem optimistic to think that your employer who is requiring you to sign a non-compete, or who has fired you or laid you off and is offering to sign a general employment release agreement in exchange for that signature, will sign one releasing you from those duties. However, employers do so frequently, and there are a number of strategies for persuading them to do so. Conduct adequate advance research into the importance your boss places on the non-compete agreement, what he or she would likely be giving up in exchange for releasing you from it , and arrive at the meeting with an understanding of what the various interests at play in this situation are. It may be possible to convince your employer to release you from the terms of your non-compete by demonstrating the negative impact that a non-compete would have on your ability to earn income. Offer to provide your employer with the names of individuals who might be good replacements for you. Offer to assist in training of new employees. If your agreement provides that you may not work for another company that competes with your former employer, offer to agree to a confidentiality agreement, which would prevent you from taking proprietary information from your current employer to a new employer. For example, if you are an employee of a sales division, you won’t solicit your former employer’s customers, etc. If your employer is amenable, take your suggestion for the modification or release in writing and advise that you would like to meet again to discuss the subject. Be flexible with respect to the terms you are willing to accept in exchange for release from the non-compete.
Getting Legal Help
Consulting with a legal professional is important when attempting to contest or negotiate terms of a non-compete. Experienced attorneys understand the multiple factors involved in your situation and will help you determine if your non-compete is valid and, if challenged, how it will be interpreted by a court. It is helpful to have the opinion of a legal professional when determining a course of action. An attorney who is familiar with your industry and has experience working on non-competes can provide information about how courts in your jurisdiction will treat your agreement.
Taking Legal Action
- Work with your attorney to carefully review your agreement, the length of time of the non-compete, what restrictions are imposed, the parties bound by the agreement, etc. You will begin by trying to identify the governing body of law you are bound under.
- Your Attorney will try to resolve any issues by contacting the other party and trying to reach a compromise – without the need to litigate.
- Try to get a neutral party, either a mediator or settlement officer, to act as a go-between to make an offer to settle on both sides.
- If both sides cannot work out a settlement then you may have to go to court . An option depends on the governing law and when you can or must file your case.
- You may need to file a motion for injunctive relief in some cases. This means that you are asking for the court to order the other side to stop enforcing the non-compete agreement.
- Then you will go through the process called discovery. This is where you exchange evidence and information with the other party and prepare for trial.
- The next step is to go to trial to present your case and evidence to the judge (or jury) or simply ask the judge to grant you the outcome you are seeking.
- Depending on the outcome obtained, you will then have to pursue or enforce the judgment.