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Are noncompetition agreements fair?
In many industries and job sectors, employees expect to receive some form of noncompetition agreement at some point during their time with a company or as they exit. Whether or not they are commonplace, are such noncompetition agreements justifiably fair to the employee? To some degree, this question spend on individual priorities and perspectives on employment law, but in the legal sense, viable noncompetition agreements must meet three standards.
First, the agreement must be reasonable in its scope. This means that the agreement cannot place objectively unreasonable restrictions on the employe, especially as it relates to geographical restrictions or periods of time. Many agreements simply ask too much from an employee. If an agreement’s reach far exceeds its grasp, it may not hold up on court.
Second, the agreement must be mutually beneficial, or “supported by consideration” when the employee enters into it. This means that the employer may not merely require that an employee agree to certain behavioral restrictions after leaving the company or while employed within it. Rather, the employee must receive something of relatively comparable value in return for entering into the agreement at the signing or very soon after.
Third, the agreement must actually protect a business interest of the employer. This means that the agreement cannot restrict things that are not demonstrably important to the function and success of the company requesting it. This is similar to the first issue addressing the scope, but more specific.
If an agreement does not meet all three of these standards then it probably practically and legally unfair. Should you find yourself presented with a noncompetition agreement, be sure to review it with an experienced attorney to ensure that your interests and rights remain protected, and to identify any weaknesses that may compromise the integrity of the agreement in court.
Source: Findlaw, “Non-Competition Agreements: Overview,” accessed Dec. 01, 2017