When you apply for a job in various industries, your soon-to-be employer may ask you to sign a non compete agreement. These restrictive covenants are very common when it comes to employee applications, employment agreements, and contracts regarding the sale of a particular business. Before you sign on the dotted line, there are some facts that you need to understand about the non compete agreement first.
What Is A Non Compete Agreement?
As a general rule of thumb, you shouldn’t sign anything that you don’t understand. A non compete agreement will be a signed agreement between you and your employer. Within the agreement, there will be a list of terms that you must adhere to for the set length that is stated in the agreement. When you sign a non compete contract, you give up your right to go into business or work against the employer in any type of business that is of similar nature to your employer’s business.
Most contracts will state a specific geographical location that you may not engage in similar business activities within. There should be a clearly stated amount of time that you’re restricted from engaging in like business. When it comes to engaging in a similar business, most contracts will restrict you from doing so in the capacity of an employee, owner, part owner, significant investor, or independent contractor.
Are You Obligated To Sign The Non Compete Agreement?
Any Miami non compete attorney will reveal that you never legally have to sign a non compete agreement with an employer. However, employers have a lot of freedom here, and it can be difficult to seek compensation when things don’t go your way. If you refuse to sign an agreement with a potential employer that you’re looking to get hired with, they have the right to not hire you.
Likewise, if your current employer now wants to have you sign a non compete agreement, they reserve the right to fire you if you don’t sign it. While this may seem a bit over the top, in most cases, it’s not. If you’re already working for an employer, they’re more likely to work with you to create a non compete agreement that you both can live with.
A Look At Non Compete Agreements
Just because your employer or potential employer wants you to sign a non compete agreement, it doesn’t mean the agreement is reasonable. Since the scope of these agreements is going to vary depending on the industry and practices of the employer, defining reasonable isn’t always easy to do. A Miami non compete attorney can provide you with some necessary insight on how a judge may rule on a case.
The judge will usually consider a few different factors in their assessment of whether or not a non compete agreement is reasonable. These include:
- What geographical area is being restricted? How does this affect the employee’s ability to earn a living in their area?
- Are there legitimate reasons why the employer needs a non compete agreement to protect its livelihood?
- Did the employee receive adequate compensation or benefits for signing the agreement?
- Does the agreement restrict an employee from working in a different type of work?
- What is the official length of the contract?
It’s vital to realize that each non compete agreement case is going to be different from the next. For this reason, a judge is going to take the totality of the agreement along with reasoning to determine its fairness. Each state tends to have its own laws regarding non compete agreements. Therefore, the result of a high-profile case in another state may not carry any precedence over to your state.
What Is Considered A Legitimate Reason For A Non Compete Agreement?
An employer can’t just ask you to sign a non compete agreement to deter you from switching to another employer in the industry. Rather, they must have a valid reason for the contract. It must be a necessity to protect the business’s livelihood. One of the best ways to discover what is considered legitimate and what’s not is to look at a couple of examples below.
A big reason that an employer may ask you to sign a non compete agreement is that they are allowing you to meet all their high-profile customers. They have a legitimate interest in ensuring that you don’t steal their customers if you decide to switch to another employer.
What Is A Reasonable Geographical Limitation?
Each non compete will list a geographical location that you may not work in when performing business of the same nature. What’s considered a reasonable geographical distance is going to highly depend on the specifics of the agreement. The first aspect of the geographical component that a judge will evaluate is whether or not the employer does business in that area. In general, an employer can’t have an employee sign a non compete agreement for a geographical area they don’t service.
The judge will also take a look at the amount of time the contract is enforced. The longer the duration of the contract, the smaller the geographical region will need to be. It’s not likely for a judge to enforce a non compete agreement that restricts a former employee from working within the state for many months or years. However, they’re more likely to enforce this if the geographical area is restricted to a specific town that the employer does business in.
What Is Considered A Reasonable Duration Of Time?
Each contract will have a specified time period that the employee is restricted from working in a similar industry. What’s considered reasonable will highly depend on the interests that the business is trying to protect. A judge will take a look at what the protectable interest is for the employer. They will determine how long is reasonable for the employer to need to protect that interest. Most long-term restrictions will not be upheld, except for very unique circumstances.
