A non-competition agreement, which is sometimes known as “an agreement not to compete,” is a contract where the employee agrees not to enter into or begin a similar profession or business in competition against his or her employer.
Non-competition agreements are typically signed when a new employee begins work and will take effect after the employment relationship ends.
For a court to find a non-competition agreement valid, the non-competition agreement must meet certain requirements. For one thing, it usually must be supported by some form of “consideration” when it is signed.
Consideration is value that each party receives, in return for agreeing to the contract. Essentially, it means that the non competition agreements will not be valid if the employer asks an employee to sign the non-competition agreement without giving the employee something in return.
For a new employee, the new job is sufficient consideration for signing the non-competition agreement. An existing employee, on the other hand, must be offered some sort of incentive to sign the agreement, like additional vacation time or a bonus.
In addition, a non competition agreement will only be valid if it protects a legitimate business interest of the employer. The employer is not permitted to require a non-competition agreement for any reason it chooses.
For example, a non-competition agreement may be used to protect the business’s goodwill that the employee developed with customers, or to prevent an employee from taking confidential information to another employer. In order to protect trade secrets or other confidential information,
the employer is required to prove that it took reasonable measures to keep the information secret and that the information will provide the business with a competitive advantage.
Finally, a court must find that the non-competition agreement is reasonable. During a review of a non-competition agreement, a court will look at the needs of the employer and weigh them against the burden that the agreement places on the employee.
Courts will require a non-competition agreement to be reasonable in both duration and scope. A non-competition agreement must contain a duration of time where the employee is not permitted to compete with his or her former employer.
The duration of the non-competition period must not be too long. For example, if the non-competition agreement is designed to protect special pricing considerations that the employer receives from vendors,
then the length of the agreement should not be any longer than the time that the information remains of value to the employer. The geographic scope of the agreement must be reasonable too.
A court will look at the services provided by the employee, and the importance of the services to the employer’s business, to determine the appropriate geographical area. For example, the geographical scope of a senior salesman will most likely be larger than the geographic scope for a senior sales manager.
Determining whether a non-competition agreement is valid, and therefore, whether you are able to work for a competing employer or start your own competing business, depends on many fact-specific factors. The validity of the agreement will often depend
greatly on the specific circumstances of the case. Be sure to get legal help to learn more specifics about these issues. For More DetailsCall 1-888-699-2432
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