From one job to the next: the non-compete agreement problem
The non-compete scenario
You worked for a business for several years and now you are moving on; however, due to a non-compete agreement, which you signed when you began employment with your former company, you now have limitations and restraints in your ability to work within the same industry as your previous position. Now what?
You invested in and employed a key employee in your business, and he or she has decided to leave your employ and you have information he or she intends to start up a competing business. Is your non-compete going to hold up?
The enforcement of non-compete agreements depends on state law
A company has the right to protect its business and its intellectual property, but only in a “reasonable” fashion. In the aforementioned situations, the answers may ultimately depend on a court’s analysis of what is reasonable within the terms of your non-compete agreement.
The current legal trend weighs against overly broad non-compete agreements; yet, the law depends on your particular state. For example, in California, non-compete contracts are generally unenforceable. However, in Florida, broad non-compete provisions may be upheld if the restrictions are reasonable and warranted by a legitimate business interest. In other jurisdictions, the contracts only restrict former employees from working with customers of the former employer with whom the former employee had personal contact. Some non-compete agreements can be revised or rewritten by the courts, some are either legally valid or legally void.
In South Carolina, non-compete agreements have historically been disfavored. However, today the court will weigh the interests of the employer against the interests of the employee and uphold the agreement if it is reasonable and necessary for protecting the interests and rights of the company or employer. Generally, a South Carolina court will consider the following questions in determining whether to uphold a contract:
- Is the agreement necessary to protect the legitimate interests of the employer?
- Are the restrictions reasonably limited in regards to duration and geographical scope?
- Are the restrictions harmful and oppressive to the employee’s ability to earn a living?
- Was the agreement supported by consideration?
- Does the contract align with sound public policy?
A South Carolina court will assess such questions and make a decision, based on the specific facts and circumstances of your employment relationship.
Ultimately, non-compete law can be quite variable. For example, what if an employer, based in a state that permits liberal non-compete agreements, sues a former employee in a jurisdiction such as California (which disfavors such agreements) for violating the agreement? Based on complex venue and choice of law issues, the ruling on a particular contract could differ significantly.
The conflicts associated with non-compete contracts are often determined on a case-by-case basis. Therefore, if you find yourself in the common non-compete debacle, it is best to retain the assistance of a qualified business law attorney.