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5 Things to know about noncompetes

If you were asked to sign or have signed a noncompetition agreement, commonly referred to as a noncompete, with your employer, you may feel trapped into either staying with that employer or changing careers. However, noncompetes are not always enforceable in the ways you may assume or have been led to believe. Here are five things to know about noncompetes before you sign.

Geographical restrictions are not exhaustive

Geographical restrictions of the agreement must not be too broad or unreasonable. Employers cannot impose restrictions in geographical areas where they do not conduct business. A knowledgeable attorney can help you determine what geographical restrictions, if any, apply to you under the terms of any noncompete agreement you sign.

Employment restrictions are nuanced

Job restrictions imposed on the employee must not prohibit employment with employers who are not, or are not associated with, competitors. Whether a former employee has violated his or her noncompete truly depends on the specific facts.

For example, in 2015, Forbes reported on a case where an employee of an IT staffing company was fired, then began her own IT staffing company and hired some of her former co-workers. The judge found the original employer to be commoditized, meaning its clients typically used several competing staffing companies at any given time. As such, there was no violation of the noncompete on the part of the fired employee who started her own IT staffing company.

The duration of a noncompete matters

The length and scope of the agreement must not go beyond the time it takes the employer to reasonably recover from the loss of the employee. The length of time a noncompete is enforceable depends on various factors including:

  • The size of the company
  • The employee's specific position
  • How long it takes to replace the employee

Therefore, if you are being sued with regard to a noncompete agreement, you should consult an attorney to help determine whether you actually violated the agreement.

Concerning confidentiality

When a noncompete is used to protect confidential and proprietary information, the employer must engage in proper measures to keep the information secret. Furthermore, the information must specifically provide the employer with a competitive advantage. If the confidential data does not warrant protection, it is not covered under the noncompete.

Limiting investments cannot create an undue burden

The noncompete must not place undue or unusual restrictions on the employee to invest in a competitor. This can be complicated, but an attorney can help you identify proper and improper investments when you leave.

Know your rights before you sign

In short, the agreement must be reasonable, and not restrict an employee who is not essential to the functioning or existence of the employer. There can be some subjectivity on the part of an employer, employee, or judge when it comes to determining reasonability. An attorney who is experienced with noncompetes can help you understand what is reasonable when it comes to the terms of any noncompetitive agreement you plan to sign, need to negotiate, or have already signed.

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