Is My Non-Compete Enforceable?
An employment relationship is like a marriage. Both husband and wife enter the arrangement with good intentions, and neither side really contemplates divorce on the wedding day. While many employers require employees to enter into restrictive covenants – “non-competes” – as a condition of new employment, much like a “wedding day”, neither employer nor employee seriously contemplate what obligations they will have to the other when they separate. Restrictive covenant enforcement is state and jurisdiction specific, and there is no “one size fits all” when determining whether an obligation will be enforceable. Each situation is evaluated on its own merits. Consider the following as a checklist of preliminary factors when evaluating your non-compete:
- Was I fired or did I resign? – Enforcement of a non-compete is more likely when the employee resigns as opposed to an employee who was involuntarily terminated.
- Was I offered a severance? – “Pay to Sit” scenarios, where the employee is paid ongoing salary continuation for the length of the non-compete, are more likely to be enforced by a Court than not.
- How long did I work there? – If the restrictive period is longer than the actual term of employment, that is a flag suggesting limited enforcement unless the employee obtained very damaging information to the company in a brief time.
- What type of restriction is it? – Restrictive covenants are often called “non-competes” as a generic term, but there are several options with varying responsibilities. A non-compete limits direct employment by a competitor, while a non-solicitation provision would not limit direct employment but only restrict contacts with customers and vendors. Be careful, however, because a non-solicit can be worded so broadly that it has the de facto impact of a non-compete.
- Does the restriction make sense? – Nationwide restrictions are more likely to be reduced or only applicable in specific scenarios where impact can occur from anywhere in the country. Focus on where the work was performed and customers live, as that is the restriction most likely to be enforced.
Beyond these universal points, there are numerous factors to be evaluated in determining whether a restrictive covenant is enforceable. Margolis Edelstein has litigated on behalf of employees and employers in restrictive covenant cases and can assist your evaluation of these and other factors.