Is a Non-Compete Agreement Legal?
Whether or not your non-compete agreement is a legal and binding contract depends on state or local laws, the scope of the restrictions your employer included, precedents set in court decisions, and a variety of other factors.
In a few states, they're generally not legal. For example, in California, a non-compete agreement is enforceable only if someone sells a business and agrees not to compete with the new owner. That aside, California employers cannot restrict the livelihood of their current or former employees.
But in many other states, they are legal. Still, these states typically don't want to deprive employees of earning a living in their chosen fields, but they also want to protect companies. It's a balancing act and scope is a big consideration. So, a non-compete agreement might be enforceable in your state, but only if it's reasonable in scope and necessary to protect the company's interests. For example, it might be enforceable if it restricts you from working for a competitor for six months within a 25-mile radius, but not beyond that scope or if you can prove it will seriously impact your right to make a living.
It might also depend on why you left the company. For example, if your employer fires you for "good cause" or you quit to take a new job, it might be enforceable. But if your company terminates you or you quit for reasons beyond your control, such as a layoff, wrongful termination or permanent disability, it might not. The courts are typically hesitant to enforce a non-comp when job loss is not the employee's fault.
Yet another consideration might be whether or not you were fairly compensated for signing such an agreement that gives up some of your rights. If you're a new-hire at the time your employer asks you to sign, then employment alone might be compensation enough, at least for a court. But if you've already worked there for awhile and your employer doesn't offer you an incentive to sign it, other than termination if you don't, then a court might be on your side if you refused to sign and your employer retaliated.
Regardless, some employers know, but don't care, that their non-compete agreements are not enforceable, in whole or part. They might try to get you to sign on the dotted line anyway. It's an intimidation tactic to protect that for which they have no right to protect. They count on employees not knowing or checking its legality. If you don't sign it, they might terminate or refuse to hire you, or deprive you of some benefit or perk. But the courts frown on employers behaving in this way, and you could have legal recourse if this happens to you.
If any part of a non-compete agreement is unreasonable, some courts will declare the entire document null and void. Other courts will simply "blue pencil" the document, meaning that they'll strike only what's unreasonable while enforcing the rest.
As you've probably figured out by now, there is no clear-cut answer that covers each and every state. In many cases, it's up to the interpretation of the courts or arbitrators. But generally, the less restrictive a non-compete agreement is, the more likely it is to be legal, where it's legal at all. Still, employers can't force you to sign "just because." They must have legit business reasons for insisting on non-competition.
To discover if non-compete agreements are generally enforceable in your state, start by contacting the nearest labor office. If they don't have an answer, they can probably steer you to a government agency that does. If you prefer to strike out on your own, try researching the State Labor and Employment Law resources here at Job Searching: Technical.
If you have doubts about signing a non-compete agreement or any employment-related contact, see an attorney first. It might save you heartache down the road. Your employer must give you a fair amount of time to think it over for that very reason.
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|This article is just a guide and not intended as legal advice. Neither the author nor publisher are engaged in rendering legal services. Please see an attorney for legal advice. Because laws vary by state and are subject to change, neither the author nor publisher guarantees the accuracy of this article.|
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