Non-compete agreements

These actually come in 3 flavors: (1) you may not use confidential information; (2) you may not solicit our clients or employees and (3) you may not compete against us.  Each has different limitations. Worse, the limitations depend on what jurisdiction you are in.

Nonetheless, here are some basic facts:

(1) “confidential information” can be anything.  Customer lists, pricing techniques, the formula for Coke, cost information.  So be sure you know what you are calling “confidential information.”  Generally, if it is information that is not widely known and that you work to keep private, it could qualify as “confidential information.”  But not always.  At the same time, some information which is widely known can be confidential too.  Facts are important.

(2) “Soliciting” clients or employees sounds explicit but isn’t always.  For example, calling the client of a former employer and asking them to transfer their business to the new firm is “soliciting.”  But how about merely sending out a notice that you have changed jobs and how to contact you if they want to?  The same applies to “soliciting” fellow employees.  Again, facts are very important.

(3) You may not compete against us.  In most states, this blanket statement cannot be enforced.  Why not?  Because the 13thamendment to the Constitution outlawed slavery.  If this simple statement were enforced literally, you could never change jobs and still work in your chosen profession.  So the courts (those that will enforce any non-competition clause) limit the clause to what is “reasonable” in geographic area and “reasonable” in time.  So what’s reasonable?  That depends on the profession and expertise. For example, a hairdresser at a fancy salon might be 5 miles and 1 year while a doctor might be 25 miles and 2 or 3 years.  Every state has its individual caselaw on the definition of “reasonable” for each profession.

You should know something else: If the agreement is being signed as a pre-requisite to being hired it may be valid. But if the employee has already been hired and only now is being handed the agreement and told sign or be fired, it may be void for what lawyers call “lack of consideration.”  In other words, the employee is being told to give the employer something but is not getting anything back.  (But some states say that being allowed to keep your job is adequate.  Again, it depends.)

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