The Ins and Outs of Non-Compete Agreements: Solid Advice from Experienced Lawyers

An Overview of a Non-Compete Agreement

Non-Compete Agreements are contracts in which the employee promises not to compete with his/her employer after the employment ends. These agreements supplement non-disclosure or confidentiality agreements. They are most commonly used by companies where there is industry-specific training or confidential information shared, and where the employer has to invest money or resources into the training of the employee. By signing a Non-Compete Agreement, the employee is subject to restrictions on their ability to work for a competitor, soliciting their prior employer’s customers, or competing directly with the ex-employer after their employment ends. The rationale is that these restrictions will be a disincentive for the employees to take of the training and start-up costs and go start competing with the former employer .
Non-Compete Agreements are enforced differently in various states. Most of these restrictive covenants are disfavored and under very strict scrutiny. The restriction on movement of employees has a disruptive effect on interstate commerce and makes it difficult for employees to function from one state to another. Also, they disrupt the natural movement of workers from job to job. Often, Non-Compete Agreements are not enforced or there is a very limited enforcement based on a company’s ability to legitimately protect their trade secrets or other legitimate and protectable interests and usually to the geographies or the time limits, or both, set forth in the agreement.

Hiring a Non-Compete Agreement Attorney

As an employee, you may think that you can get away with disregarding what your non-compete says without experiencing any negative repercussions. However, this is a foolish and shortsighted miscalculation that could potentially put your career at risk. It’s vital to consult with a non-compete lawyer before making any moves that could potentially violate the terms of your agreement.
The top reason a lawyer should be retained is that they know the business and employment laws inside and out. Do you? Probably not. You may even be asking yourself: Why should I have to carefully read, consider and understand the terms of a "legal document" my employer had my sign when I hardly knew what it meant? It is no coincidence that the very nature of non-competes is that they are quite complicated and wordy and do not lend themselves to easy reading or interpretation. Employers write them precisely to limit their obligations to employees so that they cannot later be considered independent contractors or otherwise set themselves up for dissociation from the company. As such, employee-litigants are almost always at a disadvantage because they don’t realize the legal implications of what they have already gone into agreement about until it’s too late.
If you are not legally educated, you probably would not be able to discern whether your non-compete is valid or if anything has been breached upon cursory review; therefore, the guidance of an attorney "in the know" is absolutely crucial.
Do not wait until it is too late!

Key Components of a Non-Compete Agreement

A non-compete agreement typically includes three essential components: the duration of the agreement, the geographical scope and the types of restricted activities.
Duration is used to define the length of time that the employee is prohibited from engaging in work activities given their general or specialized training received on behalf of the employer. A reasonable duration of time avoids a non-compete agreement from being found as overly immobilizing, therefore ruining the agreement.
Geographical Scope contemplates how far an employee is prohibited from competing from their employer. Consideration must be given to the geographical location of the employer, state law, and any other circumstances unique to the employer.
The types of restricted activities are the lines of work the employee cannot engage in after leaving employment with the employer. The areas of restricted activity may include: soliciting customers, soliciting coworkers away from the former employer, working in a competitive field, creating competing products, or any other activity that could damage the former employer.

Enforcement of Non-Compete Agreements Under the Law

The legality of non-compete agreements is often dependent on the laws of the state in which the agreement was entered into, as these laws can vary quite significantly. Some jurisdictions allow non-compete agreements that are not supported by adequate consideration, while other jurisdictions will strictly enforce this requirement. Most courts tend to examine the facts and circumstances of each individual case when deciding whether or not to enforce a non-compete agreement. A court will closely scrutinize an agreement in order to determine whether or not it sufficiently protects the employer’s interests. Many states, like New Jersey, require that a non-compete agreement be "reasonable" in order to be enforceable.
Most courts analyze whether or not a non-compete agreement is reasonable based on the following factors:
Before entering into a non-compete agreement, it is advisable for both the employer and employee to become acquainted with their respective states’ laws regarding the enforceability of non-compete agreements. Most states will only enforce a non-compete agreement that is fair and reasonable. Non-compete agreements that are overly restrictive tend to not hold up under judicial scrutiny.

Negotiating a Non-Compete Agreement with an Attorney

One of the first steps in protecting yourself from an unfair non-compete agreement is to negotiate for fair and reasonable terms with your prospective or current employer. When you have an attorney advising you during the hiring process, or when your lawyer reviews a non-compete that you have been presented, they can help you understand and negotiate for fair terms concerning:
All of these aspects are negotiable, and if your employer refuses to negotiate (which they are not required to do), your lawyer can still advise you on how to best navigate the situation by alerting you to your rights and which terms will and will not be enforced. Non-compete agreements require a delicate balance: worker’s rights vs. company protection . On the one hand, every employee has the right to pursue their chosen profession and develop their skills, regardless of who they have worked for in the past. On the other hand, every company has the right to protect its interests by preventing employees from working for direct competitors and sharing confidential information. Normally, if these rights to compete or not to compete are balanced, most courts will uphold the restrictions in the contract. This is where the services of an attorney can really make a difference. A talented lawyer knows local and state court interpretations of contract terms, how enforcement is handled, what defenses can be raised, and how likely it is that a non-compete will be thrown out entirely in a particular jurisdiction. They also know how to effectively negotiate so that everyone is satisfied.

Common Conflicts and Their Solutions

With any non-compete agreement, employers and employees can run headlong into one of a myriad of challenges in trying to enforce its provisions or in the case of the employee, mounting a challenge to the agreement. Some of the more common disputes may be formulated as:
• Is the employee required to "lift up the hood" and disclose its customer-list to the employer?
• Under the applicable state law, is the non-solicitation of employees provision enforceable?
• Under the applicable state law, how is a covenant prohibiting competition written to be valid and enforceable?
• Under the applicable state law, is the length and geographic region covered by the terms of the restrictive covenant valid?
• Did the employer breach the implied covenant of good faith and fair dealing by terminating the employee in order to prevent the non-compete from "running" its course?
• Whether a non-disparagement provision in the agreement is enforceable.
• Whether the non-compete agreement is void as a matter of law.
The above list only scratches the surface on disputes that arise when it comes to enforcement of or challenging non-compete agreements. Often these disputes land in the court system where the presiding judge has broad discretion in determining issues of enforceability.

Selecting the Right Non-Compete Agreement Attorney

Finding a Non-Compete Lawyer For You
Your first step is to have a free initial consultation to discuss your legal issue. After you have a basic understanding of the legal parameters of your non-compete case, choose an attorney based on their experience, skill, and track record of success in non-compete litigation. Do you have a large company facing a disgruntled or former employee? It is prudent to hire an attorney that already understands the area of employment law that encompasses your business or industry. Non-compete cases are primarily "discovery heavy" which can be very costly if the non-compete is contested . The amount of disputed evidence in these cases grows exponentially with the number of employees involved, so pick your battles carefully. In our Chicago offices we have the benefit of knowing many of the most skilled attorneys in the Chicago metropolitan area. Large, medium, and small law firms have attorneys who handle many cases a year, as well as those who only work on one or two cases at most. Keep in mind that most jurisdictions require an attorney’s attendance at all court hearings. Outside of Chicago, which has Night Court, hearings are often scheduled both sometimes early in the morning and very late in the day.