Many people make the mistake of thinking non-compete provisions in a contract are boilerplate language. However, a non-compete agreement (alone or as part of a larger agreement) is a contract between an employee and employer. A non-compete contract sets forth the restrictions on the employee’s ability to work for a competitor or even within the same industry as the current employer.
While all situations are different, it is common for the non-compete language to limit the employee’s ability to work for a competing entity for six months to two years from the date the employee’s employment terminates. However, your employer may try to get away with too much. Limiting your ability to find new employment should be a reasonable restriction under the circumstances. If the terms of the non-compete seem excessive to you, it is important to confer with an attorney.
It is important to understand that a non-compete agreement is beneficial to an employer because it limits a former employee from using his/her experience working for the employer to benefit a competitor. Additionally, the employee is typically restricted from sharing trade secrets, client lists or any other confidential information. In many cases, the employee is prohibited from recruiting the employer’s other employees to work for the competitor and from calling on customers of the employer.
A non-compete agreement is also beneficial to the employee because the employee gets something of value in exchange for signing it. Typically, the thing of value is a job, promotion or a raise in pay.
When there is litigation regarding a non-compete contract, the court interprets the agreement in favor of the employee. The court views an employee’s right to earn a living as more important than enforcing the contract. For that reason, under California law, most non-compete provisions are unenforceable. It is imperative that employers use non-compete agreements that are reasonable and not overly restrictive, or they will not be upheld in court. An employer should also be able to demonstrate that the non-compete is directly tied to protecting proprietary information and the business’ best interests.
If you are an employer or employee with questions regarding non-compete agreements, we are here to help. Contact the experienced attorneys at Mailly Law to schedule your appointment today.