Is Your Non-Compete Clause Enforceable? Be Certain Before Your Next Hire

Is Your Non-Compete Clause Enforceable? Be Certain Before Your Next Hire

In today’s world, proprietary information and highly skilled workers are more valuable than ever. Businesses recognize that they must protect their future interests while preventing competitors from stealing the advantage. At the same time, talented, experienced employees know their worth and might consider working for their employer’s competitor to further their careers.

In such situations, an employer might use a non-compete clause to limit an employee’s options once they leave the company. A non-compete clause is a provision incorporated into an ancillary, otherwise enforceable document, usually an employment contract or a nondisclosure agreement. The employee will agree, in exchange for being granted access to proprietary knowledge, not to pursue employment with competitors after the termination of employment with her current employer, under specific terms.

Non-compete clauses aim to protect legitimate business interests, but they cannot be overly broad or vague or significantly impede an employee’s ability to work. A well-drafted non-compete can prevent an employee from working for a competitor or starting a new business in the same industry. She might even be forced to cease all operations for her new business.  However, a poorly worded non-compete can end up as unenforceable, helping the employee circumvent restrictions.

There’s a lot at stake. Therefore, no matter what side you’re on, you should be aware of three major issues that impact the enforceability of a non-compete clause:

1. Scope

An employer can prevent an ex-employee from working for a competitor only when her new role is within the scope of her past job duties. A non-compete clause will most like prohibit the Chief Marketing Officer of Coca-Cola from filling the same position at Pepsi, but Google will probably not be able to stop an administrative assistant from working at Apple as a human resources specialist.

2. Duration

Except in rare cases, a non-compete clause should endure for one to two years, maximum. Duration is highly variable based on industry, so employers must pay particular attention to industry standards. A non-compete clause can endure for over two years when it involves a key employee in highly specialized, usually technical ventures. A top executive at Microsoft might be barred from working for another software company for three years, while a yoga instructor might be prevented from working for a yoga studio for only three months. 

3. Geography

Lastly, employers must narrowly tailor a non-compete clause to the specific geographical area in which the company operates. A real estate company might limit its VP of Development from working at similar companies within the confines of Houston or Harris County, but they would not be able to prevent the VP from getting a similar job in Dallas or another state.

When faced with a non-compete clause issue, employers and employees alike can turn to legal counsel for guidance. Specifically, an attorney can assist in drafting narrow, precise, and enforceable non-compete clauses as well as working closely with HR departments to track termination dates of existing non-compete clauses. Additionally, an attorney can aid an employee looking to circumvent a non-compete clause by interpreting the provision and identifying overly broad, vague, and unenforceable language. 

Either way, an attorney will educate you on your rights and obligations regarding your non-compete clause, which will save you time, money, and heartburn.

Have you ever tried to enforce a non-compete clause? Do you know how yours will stand up in court? Know your options so you can protect your business interests and your career. For more information about the enforceability of non-compete clauses, schedule a consultation. 

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