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: Last year, the Wall Street Journal reported that there has been a 61% increase since 2002 on the number of court decisions involving noncompete agreements. However, this number was based only on published decisions and did not take into account cases settled out of court or unreported decisions. Although employers enforcing noncompetes may be accomplishing their goal of discouraging employees from starting up a rival company, the practice may have the unintended effect of stifling innovation (especially in the high tech industry). In fact, in pursuit of economic development, innovation and entrepreneurship, the Governor of Massachusetts supports the elimination of noncompete agreements.
Author: Melissa A. Silver, JD, Legal Editor
This section helps HR professionals manage challenges that come with operating in multiple states, notably complying with differing state and key municipal laws, and addresses the pros and cons of having a centralized or decentralized HR department. Trends currently affecting multistate employers are identified, such as same-sex marriage laws and tracking various state leave laws, are discussed.
In-depth review of the spectrum of Indiana employment law requirements HR must follow with respect to terms of employment.
In-depth review of the spectrum of Texas employment law requirements HR must follow with respect to terms of employment.
Under a new law that takes effect January 1, 2016, the enforceable term of a noncompetition agreement in Oregon will be reduced to 18 months.
In-depth review of the spectrum of Oregon employment law requirements HR must follow with respect to terms of employment.
Hiring away a rival's key performer can bring a host of risks for unwary employers. On this XpertHR podcast, Texas employment attorney Mary Goodrich Nix details the litany of risks that can arise, especially if the new hire signed a restrictive covenant with his former employer, but also offers practical solutions.
Two sections of the Employment Law Manual now reflects Runzheimer Int'l, Ltd. v. Friedlen, in which the Wisconsin Supreme Court ruled that continued employment of an existing at-will employee is adequate consideration supporting the enforcement of a restrictive covenant.
Arkansas has enacted a law that addresses when covenants not to compete would be enforceable in an employment relationship.
Guidance for HR on the use of noncompete agreements to prevent employees from competing with the employer.