A non-compete agreement is a contract between an employer and an employee where the employee agrees not to engage in business activities that compete with the employer’s business for a specified period and within a specific geographic area after leaving the company.
The primary goal of these agreements is to protect the employer’s business interests. Non-compete agreements are common in many industries, but their enforceability can vary significantly.
Why Do Employers Use Non-Compete Agreements?
Employers use non-compete agreements to protect confidential information and trade secrets from being used by competitors. These agreements prevent employees from taking clients or customers to a competing business to ensure that investments in employee training and development are not lost to competitors.
Are Non-Compete Agreements Legal?
The legality of non-compete agreements varies by jurisdiction. In general, courts look at several factors to determine if a non-compete agreement is enforceable:
- Reasonableness: The agreement must be reasonable in scope, duration, and geographic area.
- Legitimate Business Interest: The employer must have a legitimate business interest to protect.
- Consideration: There must be valid consideration, such as a job offer or promotion, in exchange for signing the agreement.
- Public Policy: The agreement must not violate public policy by excessively restricting an employee’s right to work.
How Long Can a Non-Compete Agreement Last?
The duration of a non-compete agreement must be reasonable and not longer than necessary to protect the employer’s business interests. Typically, courts have upheld non-compete agreements lasting from six months to two years. However, the appropriate length depends on the industry and the specific circumstances of the case.
What Geographic Area Can a Non-Compete Agreement Cover?
The geographic scope of a non-compete agreement should be limited to the area necessary to protect the employer’s business interests. Courts are more likely to enforce agreements with narrowly defined geographic areas. For example, a non-compete agreement for a local business might only cover the city or county where the business operates, while a national company might have a broader scope.
What Makes a Non-Compete Agreement Unenforceable?
Several factors can make a non-compete agreement unenforceable:
- Unreasonable Scope: If the agreement’s scope, duration, or geographic area is excessively broad, a court may find it unreasonable.
- Lack of Consideration: If there is no valid consideration, such as a new job or promotion, the agreement may not be enforceable.
- Violation of Public Policy: If the agreement excessively restricts an employee’s right to work, it may be deemed unenforceable.
- Lack of Legitimate Business Interest: If the employer does not have a legitimate business interest to protect, the agreement may not be upheld.
How Can Employees Challenge a Non-Compete Agreement?
Employees can challenge a non-compete agreement by arguing that it is unreasonable or unenforceable. Factors that may support a challenge include:
- The agreement’s duration is excessively long.
- The geographic scope is too broad.
- There was no valid consideration for signing the agreement.
- The employer does not have a legitimate business interest to protect.
- The agreement violates public policy by excessively restricting the employee’s right to work.
What Are the Consequences of Violating a Non-Compete Agreement?
Violating a non-compete agreement can have profound consequences for employees. Potential outcomes include injunctions, where courts may issue an order preventing the employee from engaging in the prohibited activities. Employees may also be required to pay monetary damages for any losses the employer incurred due to the violation. Additionally, employees may be responsible for paying the employer’s legal fees if the employer prevails in court.
Contact a Skilled South Jersey Employment Lawyer at The Law Offices of Leo B. Dubler, III, LLC for Legal Assistance with Non-Compete Agreements
If you have questions about non-compete agreements, contact the South Jersey employment lawyers at The Law Offices of Leo B. Dubler, III, LLC. We serve clients in South Jersey, including Cherry Hill, Burlington County, and Camden County. For details, call our Mount Laurel and Atlantic City, New Jersey, offices at 856-235-7075 or submit our online contact form to schedule a free consultation.