Non-compete agreements aim to restrict an employee’s ability to work for a competitor after leaving their current job. However, some provisions in these agreements can be overly broad and unenforceable.
As an employee, it is important to understand when a non-compete crosses legal boundaries.
Broad geographic restrictions
One sign that your non-compete may not hold up is if it bars you from working anywhere in the entire country or world. Most courts require geographic limits to be reasonable and tied to where the company operates.
Long time frames
Another red flag is a non-compete duration that extends longer than needed to protect the company’s interests. Agreements lasting multiple years or your whole career are unlikely to be reasonable restrictions in the eyes of the law.
Lack of consideration
Most states require non-competes to provide employees something of value, known legally as “consideration,” in exchange for signing. This is often continued employment or special training. If you did not receive any consideration for agreeing to the non-compete, a court may rule it unenforceable. Employees who signed after starting work especially need to review if the contract includes new consideration.
Scope beyond protecting legitimate interests
Finally, non-competes that essentially prevent you from working in your profession at all are overreaching. The agreement should be narrowly tailored to interests such as trade secrets or client relationships. Barring any work for a competitor often fails the reasonableness test.
Approximately half of American businesses require non-compete agreements from their employees. While non-competes protect employers, overly broad agreements tend not to hold up in court. Understanding unenforceable provisions can empower employees during job transitions.