Non-compete agreements: what they are and how they work

As the employment market begins to heat up, many New Yorkers are taking advantage by entering into employment relationships with different employers. A common requirement from employers is a non-compete agreement. Many employers require new employees to sign a non-compete agreement before being hired. But what is a non-compete agreement? How do courts enforce them?

A non-compete agreement restricts an employee from accepting employment with certain other employers for a certain period of time after leaving the employer that the non-compete agreement has been made with. For example, a company might fear that a sales person might try to take accounts away from the company if the sales person leaves and joins the sales team of a different company. To prevent this situation, the company might require sales staff to not go to work for a company that sells similar goods or services for a certain period after leaving the company.

There are some requirements that courts generally impose on non-compete agreements for them to be enforceable. First, they must be reasonable in duration. The company has an interest in protecting its trade secrets and other confidential information. But most courts will require a limitation in the amount of time a former employee is restricted from working for other similar employers. If a non-compete agreement tries to bar a former employee from working for certain other employers in perpetuity, for example, courts will typically prevent this from being enforced in perpetuity.

Second, requirements must be reasonable in scope. For example, a non-compete agreement that prevents employees from working for companies that produce similar goods and services may be reasonable. A non-compete agreement that prevents an employee from working for all companies is much less likely to be found reasonable.

There are a few other rules for non-compete agreements, and the rules can vary widely by jurisdiction. An employment litigation attorney can be a good resource for employers seeking employer representation and employees seeking employee representation.