RELATIONSHIPS AND INFORMATION
Employer Business Protection
Non-competition/non-solicitation agreements are used to protect the employer’s business relationships and information at the end of an employment relationship. These agreements are governed by state law, so there is quite a variation in the approach by different states. In most states, non-competition/non-solicitation agreements are allowed but viewed with suspicion by the courts. In California, North Dakota, and Oklahoma they are not allowed in the employment context at all, but can be used in other circumstances, such as the sale of a business or dissolution of a partnership.
If you have been offered an employment contract with a non-competition agreement included, or offered a separate non-competition agreement, be aware that they often include restrictive clauses such as:
Overly broad definition of the geographic “market area;”
Overly broad product or service descriptions of the “product market;”
Mis-statement/exaggeration of your position or geographical area;
Attaching a customer list which includes customers you do not service and/or products/services you do not sell;
Overbroad confidentiality provisions;
Mandatory arbitration of disputes instead of court resolution;
Strict limits on your ability to contact colleagues after the employment comes to an end (“non-solicitation” clauses).
These clauses can be quite limiting and, unfortunately, surprising to an employee if they are fired/terminated, laid off, furloughed, offered severance, etc. Non-competition agreements must therefore be carefully considered in advance of signing, and certainly not ignored because human resources and/or your supervisor is in a hurry to get it signed.
The lawyers at Pelton Graham can review the proposed non-competition agreement and assist you in negotiating fair and clear terms in advance of signing.