Are non-compete agreements enforceable?
Learn more about the functions and consequences of using a non-compete agreement.
Non-compete agreements are documents that many corporations have utilized to keep long-time employees from leaving their positions and bringing their insider knowledge to a competitor. However, these agreements are increasingly under fire by government regulators who say they unfairly trap employees and even contribute to practices like wage-fixing.
Keep reading to learn more about whether these agreements are enforceable or even able to stay at all.
Requirements to make a non-compete enforceable.
This is where non-compete agreements run into their biggest hurdle — to make a non-compete agreement enforceable, it must meet the following requirements:
- Have reasonable time restrictions (typically a year or less)
- Be limited to a certain geographic area (think a city or county, not an entire state)
- Be “necessary to protect certain employer interests,” including trade secrets and other confidential business information. For example, if you know the KFC spice blend, you can’t take it to a competing fast-food chain.
- Be “supported by consideration,” which means the employee receives a benefit in exchange for not working for a competitor. Examples of this are bonuses or stock options.
If a non-compete agreement does not fulfil all these requirements, it is highly likely to be thrown out in court.
So, are they or are they not enforceable?
The answer is a somewhat unsatisfying ... “it depends.” Federal regulators have started to look closely at these agreements and whether or not they violate antitrust laws. Many states have passed laws banning them except in very specific cases.
To find out if non-compete agreements are enforceable in your area, check with your local laws or hire an attorney who can help you understand whether you can enforce a non-compete agreement. Discover what more you can do with Adobe Sign to securely execute these and other documents for your own business.