What You Need to Know About Non-Compete Agreements!
Many employers perceive a need to protect their interests from employees who may leave their employment to work for a competitor. As a defense mechanism, these companies have their employees sign a “covenant not to compete” or “non-compete contract” meant to forbid the former employee from working with the competition. As such clauses result in inhibiting a person’s right to make a living, such agreements are disfavored by the law. It is important for employers to review their non-competition contracts and evaluate whether it would pass legal muster.
To be enforceable under North Carolina law, a non-competition agreement must be: (1) in writing; (2) part of an employment contract; (3) based on valuable consideration; (4) reasonable as to time and territory; and (5) designed to protect a legitimate business interest. When considering the enforceability of such contracts, North Carolina courts look into the reasonableness of the time and geographic restrictions to decide whether the agreement is no wider in scope than is necessary to protect the business of the employer. The court attempts to balance the right of the employee to work with that of the employer to protect its interests. Generally, the court will give effect to the agreement if the nature of the employment is such as will bring the employee in personal contact with patrons or customers of the employer, or enable the employee to acquire valuable information as to the nature and character of the business and the names and requirements of the patrons or customers. If the agreement as drafted is too over-broad, the court will not enforce it. For instance, the courts have held that non-compete agreements are unenforceable where they prohibit the employee from engaging in future work that is distinct from the duties actually performed by the employee. An employer should seek the advice of legal counsel to help ensure that there business interests will be protected by the use of these agreements.
Whether you are an employer or an employee, you should be well aware of the technicalities of non-compete agreements. To learn more about these agreements and any employment issue in general, please contact Guy Milhalter with Anderson Jones, PLLC at (919) 277-2541 or by e-mail.