Arthur R. Lehman, L.L.C.

Is a non-compete covenant ever enforceable?

In today's job market, when someone is offered a job, they jump at the opportunity to become an earning member of society again. However, before accepting the offer and signing the contract, New York residents should carefully review their contracts to ensure there are no future bases of employment litigation against them. According to one report, there has recently been a 60 percent increase in the number of ex-employees being sued for breaching non-compete clauses by their previous employers.

What is a non-compete covenant? There are some common types of clauses or contracts that prohibit an employer from acting in a specific manner once their current employment comes to an end. The traditional non compete covenant prohibits an employee from joining competing businesses that have been identified by either their name or description, for a specific period of time and geographical area. There are certain other agreements, such as non-solicitation agreements and confidentiality agreements that also come within non-compete covenants.

Employers are interested in protecting their valid business interests once an employee who they have trained and invested money and effort into leaves their company. However, in order to be enforceable, a non-compete covenant must be reasonable. Reasonableness depends on a number of factors, such as potential harm to the employer, prohibited territory, specific time period of prohibition and the impact on the employee. Interests of the general public are also considered to determine if the clause is reasonable. Courts do not enforce an unreasonable provision.

Employees may feel pressured to enter into contracts and assume they have no say in the negotiations because of weaker bargaining power. However, they should not give into this pressure and should consider taking the contract home to review and consulting with an experienced employment litigation attorney. What they sign today may come back to haunt them later and they should make informed decisions. Employers may also want to consider discussing the non-compete covenant with someone experienced to ensure their contracts contain reasonable provisions that can stand up to the test of law.

Source: Investopedia, "Don't sign that non-compete without reading this," Anne Mollegen Smith, accessed on April 5, 2016

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