How do Non-Compete Clauses Work

Non-compete clauses are often part of an employment contract in which the employee agrees not to compete with the employer. A non-compete clause may be for the duration of the contract that limits the employee from engaging in work that would compete with the employer while the employee is still working under the employer. A non-compete clause may also restrict the employee from competing with the employer should the employment end. Often, non-compete clauses are limited in scope, with a specified time limit on the non-compete with specified geographic bounds that limit the area in which the employee cannot work in competition with the employer.

The courts will enforce non-compete clauses if the clause is reasonable. Courts look for the justification of the employer for the non-compete clause, the reasonableness of the geographic bounds of the non-compete clause, and the reasonableness of the time period the non-compete clause will be in effect at the end of the employment. The more unique the employee’s skills are, and the more unique the employer’s business is, the more likely the court will find that the non-compete clause is enforceable. Courts are also highly likely to enforce a non-compete clause during the employment as well. In enforcing a non-compete clause, the central focus of the court will be the reasonableness of the agreement. If the agreement appears unreasonable, with a wide geographic range or indefinite duration, the court is less likely to enforce it. A court may render the clause as entirely unenforceable or it may modify the clause in order to make the non-compete clause reasonable and enforce the modified clause.



If you have questions concerning a non-compete clause, signing a contract with an existing non-compete clause, or your options in a contract you have already signed with a non-compete clause, contact the attorneys at Mulligan Attorneys, today.