LAW: enforceability of noncompete agreements

[Lee Bumgarner <Lee -dot- Bumgarner -at- VIRTUS -dot- COM>]

<SNIP>Summary/Recommendations

-  Common law generally does not support the enforcement of
   noncompete clauses, because it constitutes restraint of
   trade.  State laws provide some enforcement of them, but the
   employer usually must show significant material loss of some
   sort to make it stick (trade secrets, special training, client
   lists). The losses usually must be actual, not anticipated.

1. Do not accept noncompete clauses in contracts.
   If you don't want to abide by a stated noncompete clause,
   scratch through it on the employment agreement and initial it.
   If your employer won't accept the modified contract, consider
   working elsewhere.
<UNSNIP>

In North Carolina, under the law, non-compete clauses are valid and
binding: They are contracts that must have three important parts:

1. There must be consideration. That is, the worker must receive something
in return for signing: The job, or a salary. If after joining a company a
noncompete clause is required, again there must be some consideration, like
more money, or something else.
2. Two-year limit of non-competition after leaving.
3. Reasonable geographic distance of non-competition after leaving.

Also, see the company employee manual. It may have other additions to the
clause, and they are valid.

Rather than crossing through a non-compete clause, it is sometimes better
to negotiate the distance, time, or other aspect to your liking rather than
unilaterally refusing the non-compete clause. A doctor I know who signed a
noncomplete clause succesfully negotiated hers down from a 50-mile radius
to a 10-mile radius.

Because I work for a very small company in a very specialized software
niche, our noncompete clause I signed was very specific about the industry
I could no move to (3D visualization software) and very general about the
locale (the world). My wife, a lawyer, hooted when she read the very
convoluted and badly worded agreement (several pages long) and indicated
that a first-year law student could drive a virtual fleet of trucks through
it. So, although noncompete clauses are valid, the way they are written can
be troublesome.

> <SNIP>From Elna Tyme
> 1. Do not accept noncompete clauses in contracts.
>    If you don't want to abide by a stated noncompete clause,
>    scratch through it on the employment agreement and initial it.
>    If your employer won't accept the modified contract, consider
>    working elsewhere.

You probably wouldn't be hired by most companies in Silicon Valley,
then.  Noncompete agreements are standard around here - but they specify
that you aren't to go to work for this company's clients or for
companies who have parallel products.  If you want to be a contractor in
Silicon Valley, I don't know of a single agency that doesn't have a
non-compete clause, and they simply won't deal with you if you decline
to sign it.
<UNSNIP>From Elna Tyme

If I didn't sign the noncompete agreement for my present employer, I
couldn't work. HR was flat adamant about it. Since other 3D visualization
software companies are out of this state and I am staying here, this wasn't
a difficult noncompete clause to agree to.

I am not a lawyer, so nothing I say here constitutes advice on the law. So,
if in doubt, consult a lawyer, or two.

Lee B.

****************************************************************
Lee Bumgarner, Senior Word Monkey, Word Weasel, and Word Grunt
http://www.virtus.com                   lee -dot- bumgarner -at- virtus -dot- com
Virtus Corporation                              Voice: (919) 467-9975
114 MacKenan, Suite 100                 Fax: (919) 460-4530
Cary, NC 27511

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