Warning: Covenant Not to Compete Ahead

A Covenant Not to Compete, sometimes called a Non-Compete Clause, is an agreement where one party agrees not to enter into or start a similar business, profession or trade in competition against another party.  These agreements are often found in employment situations, especially when employees are leaving their employment.

Here’s the warning:  Be VERY careful whenever signing a document that contains any sort of non-compete language.

Okay, now that that’s out of the way, let me explain why these contract provisions exist.

Employers are often worried that after an employee is terminated or voluntary leaves employment, they will work for a competitor or start their own business and will somehow have some sort of competitive advantage due to some confidential information, proprietary operations or trade secrets, or other sensitive information learned while the employee worked for the employer.   To protect against this, employers may have an employee signed a non-compete when first hired in order to avoid this situation later on.    

If an employee signs a non-compete before starting a job, the employment itself will be deemed sufficient consideration (‘consideration’ is fancy language for something needed to have a binding agreement) for the promise not to compete.  However, if an employee signs a non-compete after he/she already started work, the mere promise of continued employment is not sufficiently valid consideration for the promise not to compete by the employee. The employee must receive something else of value in exchange for the promise, such as promotion or other benefit that was not part of the employee’s initial employment.

Whether a non-compete will be considered valid depends upon the individual State laws. For example, under Florida law, non-compete agreements may be enforced by an employer as long as they are reasonable with regard to length of time and geographical distance, and as long as it serves a legitimate business interest.  Courts generally reject of non-compete agreements that restrict a former employee’s ability to make a living.

Generally, the shorter the non-compete time limit (say, one year or less), the more likely the agreement will be found to be reasonable. A non-compete applied to a limited geographical region (say, ten miles or less) also has a greater chance of being found reasonable.

Because a non-compete agreement may limit your right to make a living and because there should be certain protections in the agreement that you may not otherwise know about, you should certainly have an attorney available to review the agreement before you sign it.  Should you find yourself in this situation, contact the Greenbaum Law Firm, P.A. to schedule a consultation about it today.

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Greenbaum Law Firm, P.A.

The Greenbaum Law Firm, P.A. is a boutique, client-centric law firm concentrating in the areas of business and corporate law, contracts and agreements, and real estate. Our unique approach to the practice of law consists of positioning our clients at the center of the legal practice and pursuing their objectives in the most efficient and transparent manner.

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