Overview: One type of employment contract is the noncompete agreement. A noncompete agreement prevents an employee from pursuing a similar profession or trade in competition against the employer (usually post-employment). Noncompetition agreements are used to discourage an employee from working for a competitor using the specialized knowledge, skills, or confidential information gained while working for the employer.
The majority of the states recognize and enforce various forms of noncompete agreements. Generally, the terms of a noncompete agreement will only be enforced to the extent necessary to protect the employer's legitimate business interests. Most states will enforce a noncompete agreement if contains reasonable limitations as to the geographical area and time period in which an employee may not compete with the employer.
Trends: A few states have enacted legislation requiring employers to provide employees with a copy of the noncompete agreement prior to or concurrent with making an employment offer or an offer of change of job classification. If an employer does not comply, the agreement may be unenforceable, exposing an employer to unwanted competition.
Author: Melissa A. Silver, JD, Legal Editor
In-depth review of the spectrum of New York employment law requirements HR must follow with respect to employee discipline.
A discussion of a court's ruling that 15 months is long enough for an employee to be bound by a noncompete agreement has been added to the Employment Law Manual.
The Northern District of Illinois has rejected the Illinois appellate court's holding in Fifield v. Premier Dealer Servs. and ruled that an employee's15 months of employment was sufficient consideration to support a noncompete agreement.
Multistate employers face the challenge of complying with not only federal laws, but also differing state and local laws. This section highlights some of the states' differences in terms of preemployment testing and background checks, noncompetition and nonsolicitation agreements, and discrimination, pay and leave rules.
The Arizona Terms of Employment section of the Employment Law Manual has been updated to include discussion of an Arizona appellate court ruling in Orca Communications Unlimited, LLC v. Noder, 2013 Ariz. App. LEXIS 221 (Ariz. Ct. App. Oct. 17, 2013).
Restrictive covenants will continue to be enforceable in Illinois only when the employee is employed for at least two continuous years, after the Illinois Supreme Court declined to review a case challenging this standard.
The Virginia Terms of Employment, Employee Communications and Employee Discipline sections of the Employment Law Manual have been updated to include a discussion of the Virginia Supreme Court decision in Assurance Data, Inc. v. Malyevac, 2013 Va. LEXIS 103 (Sup. Ct. Va. September 12, 2013).
In-depth review of the spectrum of Virginia employment law requirements HR must follow with respect to terms of employment.
In pursuit of economic development, innovation and entrepreneurship, Governor Deval Patrick's administration has declared its support for the elimination of noncompete agreements and the adoption of the Uniform Trade Secrets Act.
In-depth review of the spectrum of Delaware employment law requirements HR must follow with respect to employee discipline.
Guidance for HR on the use of noncompete agreements to prevent employees from competing with the employer.