What does Noncompetition agreement mean?
Non-competition agreements are contractual agreements which bar an employee from entering into trade, starting another company, or taking another job with another company which is in direct competition with their current employer. Non-competition contracts are signed prior to employment with the specified company, but such agreements do not usually take effect until after the employer-employee relationship has been terminated.
The goal of the non-competition agreement is to ensure the employee does not use the knowledge they gain from employment in the future with a new company to compete with their current employer.
The non-competition agreement is only valid if it has a reasonable scope in time and geography, protects a legitimate business interest of the employer, and covers a specific market or subject. The non-competition agreement must also be supported with a payment fee or a valid consideration, which means the employee who is signing the agreement must receive some type of compensation or offer which has value to the employee.
Is a non-competition agreement legal?
The benefit of a non-competition agreement for the employer is clear: the employer is able to keep the former employee from competing with them or capitalizing on the knowledge, skills, or goodwill they received from their original employer. But whether or not the courts will uphold the non-competition agreement will depend on whether the court believes the burden placed on the employee was unduly imposed and is too high, especially when compared with the interests of the business.
To make this determination the court will review the duration and scope of the agreement and determine whether the duration was longer than what was needed to protect confidential information. The geographical area must also be limited. For instance, if an employee wants to work outside the original employer's geographical area (where the employer does not have any business interests) the court may decide to narrow the scope of the non-competition agreement, even if the non-competition agreement originally barred this action.
Getting help from an employment lawyer
Challenging a non-competition agreement may require legal help. If you have signed a non-competition agreement but think that the scope, geographical restrictions, or the time limit was too broad, you may have the legal right to challenge the agreement.
Although your employer has genuine business interests which should be protected, you also have the right to work and make a living. Talk to an employee rights lawyer for more information about your non-competition agreement.