Non-compete agreements are a contentious issue. Some states have banned them, and others have placed severe restrictions upon them. Those against them argue that they restrict employees’ rights, stifle wages, inhibit innovation and harm the companies that use them.
While once reserved for senior employees, many companies now require all workers to sign them, regardless of their position. The U.S. Treasury estimates that employers ask around one in five workers to do so. The majority of states in the U.S. do allow them as long if they meet three primary conditions:
They must be mutually beneficial
A business has to give an employee something in exchange for restricting their activities when they leave. A court will not consider “the chance to work for a fantastic company” sufficient. There must be an extra benefit for the employee beyond their usual wages, whether monetary or otherwise.
They must exist for a good reason
Someone on a research and development team may have access to cutting-edge knowledge that could cost a company millions if it is leaked to a competitor. Asking that employee to sign a non-compete might be reasonable. It is unlikely that a lowly intern or data entry worker has access to that information, however. Generalized non-competes that don’t serve a good purpose are usually not enforceable.
They must be specific to the position
Non-compete agreements must be reasonable in time, geographical scope and activity: Prohibiting someone from ever working for any software development company anywhere in the world ever again is not reasonable. An agreement that limits a worker from working in the same industry for six months, on the other hand, might be acceptable.
If you have questions about non-compete agreements, seek the advice of an experienced employment law attorney. They can advise you of your rights and options.