NON-COMPETITION / NONDISCLOSURE AGREEMENTS

WHAT IS A NON-COMPETITION AGREEMENT?
A  NON-DISCLOSURE AGREEMENT?
A NON-SOLICITATION AGREEMENT?

Non-competition agreements, non-disclosure agreements and non-solicitation agreements all serve distinct purposes:

  1. Non-competition agreements temporarily restrict an employee’s ability to get a job with a new employer.
  2. Non-solicitation agreements prevent a former employee from attempting to recruit the employer’s current employees, or from doing business with its customers.
  3. Non-disclosure agreements bar the employee from using the employer’s proprietary or confidential information.

Courts enforce these agreement with restraint so as to avoid unfairly interfering with a employee’s right to earn a living. Noncompetition agreements in particular should only be enforceable if they protect the legitimate business interests of the employer. If the employer can’t prove the agreement is helpful in protecting its business, it’s not enforceable. For example:

The employer, Acme, Inc. manufactures widgets. Employee Tom quits his job working as an engineer for Acme so that he can follow his lifelong dream to work as a chef. Acme then seeks to enforce a non-compete agreement to prevent him from working. Likely result: Unless the employer also runs a restaurant, it has no legitimate business interest in preventing Tom from working in food service.

Even if the employment agreement protects a legitimate business interest, it must be reasonable as to two key factors:

  1. How long does it bind the former employee? Twelve to eighteen months is common, but agreements may be longer or shorter depending on the circumstances.
  2. What geographic area does it protect? For example, is the employee only barred from seeking employment in the state where the company operates? In the region? Worldwide? A well-written agreement protects the employer where it is “doing business,” and does not overreach.

Whether the agreement is enforceable will depend on the facts of each case. Contact Daigle Law if you have questions about your employment agreement.

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