Basic Training: Queries about Employee Non-Compete Agreements

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq., owner of Ask The Business Lawyer, is an award-winning business attorney, speaker, and Entrepreneur Magazine online contributor. She saves consulting and professional services companies time, money, and aggravation by serving as their outsourced legal counsel.

Posted on December 19, 2013 in Employee Issues

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Q: For how long are employee non-compete agreements normally valid?  If a person signs such an agreement, leaves the company for a period of time and then comes back to the company, is he/she still bound by such an agreement even if he did not sign it again?  Is such an agreement valid for customers with which the company is no longer doing business?  What if the agreement mentions any and all past and present customers?

A.: Frustratingly, there isn’t a hard-and-fast rule on how long these types of agreements are valid.  In some cases, courts have set outer limits on permissible time frames, but the reasonableness can depend on the length of employment with the company, the level of employment with the company and the geographic scope of the restriction (for example, are you prohibited from working anywhere in the U.S.? Or for a competing company within a 10-mile radius?).

Courts don’t like to see people prevented from supporting themselves, so they construe non-competition provisions (as in “You can’t work for a competing company”) more narrowly.  But as to soliciting customers, they tend to uphold those, for they are the lifeblood of the business. If the agreement says “you may not solicit any present or past customers,” then don’t do it.  A non-solicitation provision is not the same as a non-competition provision.  If the agreement doesn’t say anything about soliciting customers, the non-competition generally won’t be expanded to include customers.  However, sometimes a provision may be called “non-competition” (in the heading), but cover a range of issues, including the non-solicitation of clients.  That’s where consulting with a local employment attorney will be beneficial so that you can get a clear read on the language and the conduct it’s prohibiting.

As to the issue of leaving the company and then coming back, the non-competition provision is moot, as you’ve returned to the same company.  The company can’t be in competition with itself.  Unless the company has made non-competition an aspect of company policy (e.g., through an employment manual), you generally “start fresh” when you start (or restart) an employment relationship.  But again, as different states can vary on the issue (and the law changes frequently), check with an employment attorney who is familiar with this area and the recent court decisions on the subject.

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