A Non-Compete Clause in Your Employment Contract Prevents You from Working for Your Competitors. Is It Legal?
Many employers want to prevent employees from working for their competitors. They accomplish this result by requiring employees to sign a non-compete agreement when they begin working for the company. It may be a separate agreement or part of your employment contract (a non-compete clause).
When you sign a non-compete agreement, you agree to avoid working for competitors or opening a competing business within a specific mile radius for a specific time frame. However, not all states allow non-compete agreements. Many states say they are unenforceable, especially if they are broad.
Furthermore, the Biden administration signed an executive order targeting non-compete agreements nationally. Under the new order, non-compete agreements may become a thing of the past.
What Is a Non-Compete Agreement?
A non-compete agreement is a contract signed between employers and employees that prevents employees from working with a competitor immediately after leaving a company. The agreement typically restricts the type of job you can take within a certain mile radius and time frame.
Non-compete agreements or non-compete clauses protect an employer’s interests in investing in you and hiring you for a position. The goal is to prevent you from taking your newfound education and experience and using it to help your employer’s competitor succeed.
What Is Included in a Non-Compete Agreement?
A non-compete agreement outlines the rights of employees to work once they terminate their employment with their current employer. The details included in a non-compete agreement include:
- What type of work employees can conduct
- What employers or type of employers an employee must avoid when finding new work
- How long the non-compete agreement is enforceable
- The distance the non-compete agreement is enforceable
The non-compete agreement would state that you cannot work as your current employment title with competing employers within a specific radius or specific locations for a specified time period (such as two years).
Are Non-Compete Agreements Legal in Every State?
States regulate non-compete agreements. Some states, such as Pennsylvania, New York, and New Jersey, have no ban on non-compete clauses. Florida only bans a non-compete agreement if it is overly broad and places unreasonable restrictions on an employee.
California and Oklahoma, however, will not enforce any non-compete agreements. Still, other states only ban non-compete agreements for any low-income worker.
To learn more about your state’s laws regarding non-compete agreements, contact a qualified employment lawyer in your state.
Can a Non-Compete Agreement Stop Employees from Working?
The goal of a non-compete agreement is to protect the employer. However, it cannot stop you from finding employment or starting your own business when you leave your company. It cannot deter you from ever leaving the company to find another job.
Your non-compete agreement should include specific and reasonable parameters. For instance, it should only prevent you from working for a competitor that is close to your current office location (maybe within 50 to 100 miles). Furthermore, it should only be in effect for a short time (depending on the industry).
The non-compete agreement must also outline why the non-compete agreement and location restrictions must be in place. Your employer must give a reason you need to stay a certain radius away from your current employer when you begin working for a new company or open your own business. If your customer base is within a 20-mile radius, there is no reason you cannot work for a competitor 25 miles from your last employer.
Furthermore, your employer must not prohibit you from working in a related industry. A non-employment agreement should often provide the names of specific competitors that they want you to avoid working for within the time limit of your non-compete agreement. However, related industries or opening your own business after leaving a company should not be part of the non-compete exclusion.
Your boss can ask you to sign any non-compete agreement. However, if these points are not met, the agreement may not be enforceable.
How Can an Employee Get Out of a Noncompete Agreement?
An employee can get out of a noncompete agreement if it is unenforceable. If the agreement is too broad, you can fight it and get out of it. For instance, if your employer says that you cannot work doing the same work as you currently conduct anywhere within the entire state you currently work, the agreement is too broad. It prevents you from working at all.
As a result, you can work with a qualified employment lawyer to get out of the noncompete agreement. Noncompete agreements cannot prevent you from working at all. They can only prevent you from competing with your most recent employer for a brief time.
Is There a Federal Ban on Non-Compete Agreements?
The federal law does not affect non-compete agreements and whether they are enforceable. Many non-compete agreements also include a non-disclosure clause. A non-disclosure clause prevents employees from discussing trade secrets with others, including competitors. As a result, the federal government has maintained a hands-off attitude until now.
However, President Biden has signed an executive order that requests the Federal Trade Commission (FTC) to limit the use of non-compete agreements in public and private companies (without limiting non-disclosure clauses). President Biden pushed this executive order for fear that non-compete agreements would prevent the economy from recovering from COVID and other economic hardships.
What This Executive Order Means for You
As of today, the executive order does not affect any employees or their currently active non-compete agreements. However, the FTC will begin to research how to implement these changes and what impact they can have on the economy.
Eventually, the FTC may choose to ban future non-compete agreements. Furthermore, it may make enforcing current non-compete clauses more difficult, especially if they are very broad.
Can My Employer Enforce My Non-Compete Agreement?
Not all employers have the right to enforce non-compete agreements. If your employer is located in California, he cannot enforce any non-compete agreement at any time. The laws ban all non-compete agreements.
However, if you live or work in New Jersey, New York City, Florida or Philadelphia, your employer may be able to enforce your non-compete agreement, especially if it is not too broad or prevents you from working in your industry.
Speak with a qualified employment lawyer to learn more about your rights regarding non-compete agreements. The best advice is to avoid signing anything without an attorney review. Your lawyer can help you negotiate the terms of your agreement to ensure both you and your employer are protected.
Call the dedicated employment lawyers at the Derek Smith Law Group in New York City, New Jersey, Philadelphia, Miami, and Los Angeles to review your non-compete agreement.
