Non-compete agreements are now a very common component of employment contracts. Generally, these agreements serve a useful purpose: they help keep markets and industries healthy by restricting companies from stealing each other’s employees solely to obtain clients or confidential information to damage their competitors. Smaller companies and startups are especially likely to rely on non-compete agreements to protect themselves from larger competitors. However, drafting an effective non-compete agreement in North Carolina requires walking the fine line between a reasonable contract provision (as decided by the court) and still providing protection for the business.
In deciding whether a non-compete is reasonable, courts in North Carolina will typically look to the time period an employee is restricted, the nature of the restriction, and the extent of a geographical restriction. For example, agreements that restrict an employee for five years or longer, restrict the employee from performing any and all types of work for a competitor, and restrict the employee from working anywhere in the nation would likely be found unreasonable and unenforceable. Furthermore, if a provision is found unreasonable, North Carolina courts may very well throw out the entire agreement, unless that provision is separable from the rest of the agreement. This makes drafting and enforcing non-compete agreements difficult.
So what can you do to make sure your non-compete agreement is enforceable? Most importantly, make sure you non-compete agreement has been reviewed by a North Carolina attorney. North Carolina is unique and differs substantially from how other states interpret and enforce these provisions. Also keep in mind that courts strongly weigh the specific facts of each case in deciding whether to enforce a non-compete agreement. This means it is almost impossible to provide general advice regarding non-compete agreements. Therefore, if you believe an employee has violated his or her non-compete or you would like to start including a non-compete agreement in your employment contract, please contact us to discuss how this tool can help to protect your business.
Thank you to Rob Armstrong for your contribution to this article.
Vann Attorneys | Raleigh Law Firm