Is the Noncompete Clause in Your Work Contract Legal?
Noncompete clauses are fairly common in work contracts, but they have a habit of sneaking up on former employees.
Take Colette Buser, a 19-year-old college student with years of summer camp experience, who was seemingly barred from working at any camp in Massachusetts because of her contract with her prior employer. You typically think of these sorts of contract issues affecting high-level managers and investment brokers, but as The New York Times reports, these noncompete clauses are increasingly required of employees in any industry.
So is the noncompete clause in your work contract legal?
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What Is a Noncompete Clause?
Noncompete clauses are agreements (typically contained in a work contract) that prevent a former employee from being employed by competitors of a business, or competing with that business, for a period of time after employment has ended.
These agreements often have a geographical scope, barring an ex-worker from competing within a certain distance of the original employer's business(es). In some states, however, noncompete clauses are generally not enforceable, with some exceptions.
Is the Clause Bargained-For?
In order for an agreement to become a legally binding contract, there must be some sort of consideration.
In most work contracts, a noncompete clause is agreed upon as a condition of being hired. If your employment contract contains a noncompete contract when you "sign on," it's likely that it's supported by consideration.
However, if your employer asked you to sign a noncompete agreement after hiring you, with no promise of added benefits, bonuses, or other forms of consideration, then the agreement may not be legally enforceable.
Is the Scope Reasonable?
Courts have no hard-and-fast rules when dealing with noncompete clauses or agreements, other than a general requirement that they remain reasonable.
Most enforceable agreements will be reasonable in their scope of:
- Time. It's likely not reasonable for you to be barred from competing with your former employer for 20 years, but two years may be legal.
- Geography. Depending on your position, it may be reasonable for your employer to ban you from competing globally.
- Type of employment. Your employer may wish to prevent you from working with direct competitors or anyone in the industry, and it will be up to a court to determine how reasonable this is.
The law bends toward allowing former employees to move on with their careers and allowing them to work, but you should still be aware of your employer's noncompete agreement.
- The spreading sclerosis of the non-compete agreement (Quartz)
- Tips for Negotiating Your Work Contract (FindLaw's Law and Daily Life)
- Noncompete Agreements: When are They Enforceable? (FindLaw's Free Enterprise)
- Is Your Non-Compete Clause Valid? (FindLaw's Free Enterprise)