To Compete or Not Compete, That Is the Question

A non-compete agreement is a legal document that prohibits an employee from seeking employment with a competitor of his or her former employer. A non-compete will usually include a time limit for this prohibition, as well as a geographical scope (meaning a certain distance in which a former employee is restricted from seeking employment). For example, a non-compete agreement can prohibit a departing employee from working for a competitor for a duration of one year and within a 10-mile radius. That’s quite damaging in general, but especially considering a home, a commute, and the obvious — a family. 

Now of course an employer can’t just slap a number of years and an unlimited geographical scope on a piece of paper and get away with it. Each state differs in how they deal with non-compete agreement, but under the common law, the test to determine whether a non-compete agreement is enforceable is a “reasonableness” test. The reasonableness test lists three factors that courts consider, and they are: (1) the terms of the non-compete are no greater than is required to protect the employer’s legitimate business interest; (2) the non-compete does not impose undue hardship on the former employee; and (3) the non-compete is not injurious to the public. 

Non-compete agreements have been a “thing” virtually ever since the employer-employee relationship existed; no, really, it’s been a long time coming. The first ever recorded non-compete agreement was in 1414 in the Dyer’s case. John Dyer, an apprentice, promised his former master that he would refrain from working in the same town and in the same trade for a period of 6 months following his separation. Dyer’s former master took him to court when that agreement was breached, and the judge was so unhappy with the restriction, that he stated the master should go to prison until he paid a fine to the King! 

See, non-compete agreements have been around for a while, but you will still find that many courts do not like the idea of restricting an individual from seeking gainful employment in what he or she does best. That’s why it is wise to challenge your non-compete before it’s too late!