Restrictive covenants or non-compete clauses are pretty standard in this day and age but they imply limitations for an employee upon leaving their position in a company. Such a clause prevents a worker from starting their own company or joining the competition after acquiring skills, trade secrets and qualifications at their current place of employment.
Non-compete clauses can be enforced but they have to be created in a specific way. Multiple court cases suggest that magistrates disfavor such restrictions. Very often, non-compete clauses can keep workers from finding new employment, which is why the wording of such agreements matters as far as enforceability is concerned. Click here for more information on How to Ensure Your Online Will is Legally Binding.
Enforceability Depends on Several Factors
Courts will rule against non-compete clauses that seem to be created for the sole purpose of limiting or punishing former employees. Thus, to make such a clause enforceable, employees need to focus on several essentials.
The first one is the timeframe. The aim of the clause is to enable a company overcome the loss of a worker. Thus, there’s no universal timeframe and the consideration should be based on the amount of time needed to find a qualified worker for the same position.
Unreasonable restraint is also avoided when job description specifics are included. A good clause doesn’t make it impossible for a former worker to find a new job in the same industry. The aim of the clause is to protect confidential information and client relationships without infringing upon the worker’s ability to find gainful employment in the future.
Finally, location-based restrictions will also have to be reasonable. Such a clause keeps former workers from starting a business or joining a company that works in the same area or part of town as the company attempting to enforce the clause. The geographic scope should be reasonable, protecting trade secrets and the clientele without impeding a worker from finding a new job.
Other Enforceability Factors Under Law
When examining restrictive covenants, courts will take a look at several additional criteria to determine their enforceability.
A non-compete agreement should protect genuine business interests and assets. These could include relationships with clients, trade secrets, intellectual property and patents. Such business interests warrant the creation of a non-compete clause.
Non-compete agreements shouldn’t violate public policies. A restrictive covenant that prevents a person from working in the same industry, for example, violates public policies and is not going to be enforceable.
An court also has the right to remove unreasonable provisions from a clause while letting the rest of the agreement stand. Just because one clause is considered too broad does not mean that the other provisions will become invalid.
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What to Do in the Case of a Non-Compete Agreement Breach
When there’s evidence that a former employee has breached a non-compete agreement, an employer will be entitled to initiating legal action.
For best results, such documents should be drafted by employment law attorneys. The more specific they are, the higher the chances of the agreements standing. If a lawyer can prove that the restrictions are reasonable and needed to protect a business interest, the agreement will probably stand in court.
An employer can seek a temporary restraining order or preliminary injunction to keep the former employee from committing additional violations while the legal process is taking place. Additional violations will lead to contempt of court proceedings.
A company should also be capable of demonstrating irreparable harm stemming from the loss of clients or investment after a former employee joins a new company or starts their own business. Depending on the scope of damages and the evidence, the company could be rewarded damages.
Alternatively, if a worker believes that a non-compete clause is too broad or restrictive, its validity can be challenged in court by an experienced labor law team.