Understanding Non-Compete Clauses: Key Considerations for Businesses and Employees
Non-compete clauses are a common feature in employment agreements, but they can be a gray area when it comes to enforcing them fairly. So, what’s essential to consider with non-competes? To cut through the noise, here are four key factors:
The Employee’s Role: What position did the person hold in the company? High-level employees or those with access to sensitive company strategies are often more subject to non-competes, as they may carry valuable knowledge.
Compensation: How much were they paid? Compensation can influence the extent to which a non-compete may be seen as enforceable or necessary, especially if high earnings reflect significant trust or investment by the employer.
Where They Go: Where did the employee go after leaving, and to whom? Moving to a direct competitor could raise issues, particularly if they’re bringing unique knowledge or strategies with them.
Value Taken: What value have they taken from the company by leaving? This refers to proprietary information, client relationships, or other assets that may benefit a competitor.
It’s important to remember that non-competes can’t simply stop someone from earning a living or transitioning to a new employer. Courts generally evaluate non-compete cases on a case-by-case basis, weighing whether an individual is unfairly restricted in their ability to work. The key question they often consider is: has the former employee done something wrong in the way they left or in the new role they’ve taken?
Every situation is different, and by considering these four points, businesses can get a clearer picture of whether a non-compete case is worth pursuing or defensible. In the end, it’s all about finding the balance between protecting business interests and respecting an employee’s right to seek new opportunities.