How to know if your noncompete is valid and enforceable
- August 18, 2016
- Business Law
Noncompete agreements in the U.S. are legal and enforceable as long as they are reasonable. But what does this mean?
In today’s 21st-century competitive business world, a wider variety of employers are using noncompete agreements than in years past. According to a recent New York Times article, industries, such as chefs, yoga instructors, and lawn care professionals, are using noncompete agreements today.
Fortunately, under the law, noncompete agreements are enforceable and remedies are available to employers if a breach of a noncompete agreement occurs. However, these types of agreements must meet certain factors in order to be valid and enforceable in the eyes of the court.
Valid noncompete agreements
Noncompete agreements are generally contracts between two parties in which one agrees to refrain from competing against the other for a certain period of time. Employers often utilize such agreements so employees do not walk off the job equipped with valuable skills or knowledge to use against them in the marketplace.
In order to be enforceable, noncompete agreements must essentially be “reasonable,” or “narrowly tailored to protect a legitimate business interest.” But what exactly does this mean?
Factors to determine validity
Depending on the jurisdiction, courts will use a variety of factors to determine whether a noncompete agreement is reasonable. Such factors may include but are not limited to:
- The timeframe restricting noncompetition
- The geographic limitations
- The limitations on the nature of the work
Employers must ask a variety of questions to determine if a noncompete is too overreaching. Does the agreement restrict the prohibition to compete for too long of a time? Does the agreement prohibit activities far outside potential business clientele?
Essentially, the broader a noncompete agreement is, the more likely it will not be considered reasonable.
Remedies for breach of valid noncompete agreements
When noncompete agreements are deemed reasonable, the law allows employers to pursue recourse against the breaching party. The employer can send a cease-and-desist letter to the individual who is in breach and request the party stop the prohibited activity stipulated in the agreement. Alternately, the employer can seek action against the breaching party via civil court. The employer can request an injunction, an action whereby the court orders a party to perform or refrain from doing something. Or, an employer can request damages, or compensation resulting from the breach of the noncompete agreement.
The help of a Maryland business law attorney
Employers who need legal assistance regarding noncompete agreements are encouraged to seek the help of a business law attorney who understands the intricate areas of the law. Every situation is unique. A lawyer can offer guidance as it pertains to individual circumstances.