On a weekly basis, we receive calls from employers and employees asking about the enforceability of non-competition agreements. Our answer, generally, is YES, a well-drafted non-compete agreement can be enforceable. The problem is that many non-compete agreements are not “well drafted” and, as such, are not enforceable.
A non-compete is a type of restrictive covenant, which is an agreement, or a clause in an agreement, prohibiting an employee from doing something for a period of time after leaving an employer.
A restrictive covenant can prevent an employee from forming a competing business, working for a competitor, taking a business’ proprietary information to a competitor, or luring clients or employees away from a previous employer. Types of restrictive covenants include non-competition agreements, non-solicitation agreements, and confidentiality agreements.
A non-compete is a contract whereby the employee generally agrees not to work for a competitor or become a competitor for a certain period of time after leaving a job. Non-solicitation agreements prohibit employees from asking customers, clients or employees to leave a previous employer. Confidentiality agreements and nondisclosure agreements protect confidential information and trade secrets by prohibiting employees from sharing confidential proprietary information.
Not all restrictive covenants are enforceable. To be enforceable, restrictive covenants must be narrowly tailored to protect the legitimate business interests of the employer, not unreasonably restrict the employee from earning a livelihood, and must also be reasonable from a public policy standpoint.
The biggest pitfall to a restrictive covenant is for it to be overly broad. Courts determine the enforceability of restrictive covenants on a case-by-case basis by examining what is reasonable and narrowly tailored in light of specific circumstances. However, agreements that do not specify a duration, a geographic area or the particular activities at issue will typically be seen as too broad and unenforceable.
As an employer considering a restrictive covenant, or an employee determining whether to sign, you need to consider what are the legitimate business interests to protect and what are the least restrictive methods to provide such protection. In this regard, non-compete provisions are becoming less favored because adequate protection can generally be provided through a client/employee non-solicitation and confidentiality/trade secret protection agreement.
Finally, in Virginia, since July 2020, non-competes are prohibited for “low-wage” employees, including interns, students and apprentices. A “low-wage employee” is a worker whose average weekly earnings “are less than the average weekly wage of the Commonwealth,” as well as independent contractors paid hourly rates less than the median hourly wage.
Should I Sign A Non-Compete Agreement?
If you’re asked to sign a non-compete agreement, it’s important to read it thoroughly and understand what you’re being asked to agree to. If you’re unsure about parts of the agreement, ask questions to get clarification before signing.
Key things to look out for:
- Duration: How long does the agreement prevent certain conduct for?
- Geographic scope: What areas does the agreement prevent you from working or competing in?
- Function: What specifically does the agreement prevent you from doing?
You should also ask an employment law attorney to review the agreement. Even if you believe you understand the agreement, an attorney experienced with these agreements will better know what types of things to look for to ensure an agreement isn’t too broad, which will make it harder for an employee to seek future employment.
If possible, try to negotiate with your employer for a more favorable agreement. However, many employers use a “take it or leave it” approach. If this is the case with your employer, your options may be limited to signing the agreement or not getting the job.
If you have questions, contact Merritt Green at firstname.lastname@example.org or 703-952-7560, or visit our website: https://www.generalcounsellaw.com/. Merritt Green leads the employment practice at General Counsel, P.C., a law firm located in McLean, VA representing businesses, non-profits, and individuals throughout the DC Metro area. For more information on restrictive covenants, please see these resources on the General Counsel, P.C. website.