It may be very likely that, when you were first employed at your current job, you were required to sign a non-compete agreement. Your employer can refuse to hire you, or later fire you, for refusing to sign one. So, many people get bullied into signing it because they need the job. What do you do when the time comes to leave that job?
If you lose your job, or decide to leave, and you signed a non-compete agreement, you only have two options:
- Find a job that does not compete with the former job, or
- Be prepared to defend a lawsuit if your new job competes with your old one
Although there are several arguments that can be made for finding such an agreement unenforceable, if you lose you may be required to pay attorney's fees or liquidated damages, depending on the terms of the agreement you signed.
What can make a non-compete agreement unenforceable?
Since there are several requirements that must be met before a non-compete agreement is considered valid in the first place, those same requirements, when not met, can make the agreement unenforceable. Following are a few examples.
There Is No Legitimate Business Interest to Protect
One requirement for a non-compete agreement to be enforceable is that the employer actually have an interest to be protected, such as a trade secret of some kind. If a non-compete agreement is overreaching, then an employee may be able to avoid it. For example, if an employer manufactures computer software primarily for the benefit of physicians, then that employer would not have a legitimate interest in preventing a former employee for working on software for a tax consultant.
The same is true if an employer abandons selling its products in a particular area. In that case, former employees should be not prevented from working in that abandoned area when they leave. The most commonly recognized protectable interests are trade secrets, confidential business information, and valuable relationships cultivated over time with clients, but there are others.
The Time Restriction Is Unreasonable
In most cases, a period of less than 6 months is presumed valid, and any period over 2 years is presumed invalid. However, what is reasonable may depend on the situation. For example, at least one Alabama court has determined that a 6 month non-compete restriction imposed on an employee who had only worked for the company for 2 months was unreasonable.
Confidential Information Is Essentially Open to the Public
If a company generates their sales leads using a public source open to anyone in their industry, it cannot later claim to be protecting a confidential client source. So, if you cold called people from a phone book as part of your sales efforts, the client list you generated would most likely not constitute a protectable interest.
Public Health or Safety Would not Be Served
This particular exception generally applies to healthcare professionals or highly specialized science professionals. For example, if in a particular geographic area there is a shortage of individuals in a particular health specialty, employers are usually not allowed to enforce a non-compete agreement. So, if you are one of only five brain surgeons in your state who can perform a highly specialized procedure, you likely won't be limited in your job options by a non-compete agreement.
If you have any questions or need an employment attorney to review a non-compete agreement presented to you by your employer, please give us a call.