Last Updated on December 8, 2022 by Anda Malescu
What is a non-compete agreement to employees in the United States?
In the United States, some employers may require new employees to enter into non-competition agreements before starting work. This type of agreement usually takes effect after the employer-employee relationship has ended. A non-compete prohibits an employee from engaging in a business that competes with his or her current employer’s business. While an employer cannot require you to sign a non-compete, they may terminate you, or choose not to hire you if you refuse to sign.
United States courts are generally cautious when it comes to the recognition and enforcement of non-compete agreements. In such disputes, courts consider certain factors to decide if the agreement is reasonable. When negotiating a non-compete agreement, the employers must consider limiting the agreement only to what is truly necessary to protect the employer’s legitimate business. Further, employees can ask for consideration in exchange for signing such agreement (for example severance payment).
Even if non-compete agreements are more and more popular among employers, employees are not required to agree and sign a non-compete agreement. Even if employees are not directly required to do so, not agreeing to a non-compete agreement may cost them their potential job.
While non-compete agreements are analyzed under state law, and each state is different, there are some common factors that courts look at to determine whether a non-compete agreement is reasonable.
Some of the aspects are the legitimate interest sought to be protected by the non-compete agreement, the geographic scope of the restriction, the ability of employees to make a living after the enforcement of the non-compete agreement, the duration of the non-compete agreement, the type of work the non-compete agreement is prohibiting, compensation received by the employee and others.
Every U.S. state has its own standards with respect to validity, recognition, and enforcement of non-compete agreements. At the federal level, the White House published a report on non-compete contracts in employment, holding that they “can impose substantial costs on workers, consumers and the economy more generally.”
While California, Oklahoma do not recognize non-compete agreements, the other majority of states do recognize and enforce non-compete agreements, each of them having their own particular method and requirements in doing so. For instance, New York’s standard is that the non-compete agreements are reasonable in time and space, and the prohibition is no greater than it is required for the protection of the legitimate interest of the employer.
Slightly different, the legislation of Georgia seems to be more protective and has a pro-employee perspective – the non-compete agreement must not be overbroad in time, space, and scope; it protects the interests of individuals in gaining and pursuing a livelihood and addresses commercial concerns in protecting legitimate business interests. Further, the legislation states that the non-compete agreements cannot be against public policy.
Another important point to mention is that while most of the states only protect trade secrets, confidential information and customer relationships, Florida’s legislation in regards to non-compete agreements has a broader scope – the statute protects trade secrets, confidential business information, substantial customer relationships and goodwill, and extraordinary or specialized training.
For more information on your particular non-compete agreement situation, contact us, your business attorney in Florida.
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