Question 4 – What if the non-compete agreement prevents me from working for anyone?
If the non-compete agreement prevents you from working for anyone, anywhere, for a very long time (e.g. 5, 10, 20 years, etc.), it’s likely that the entire non-compete agreement would be invalidated. However, most non-compete agreements are not this broad. Most employers are not this naïve. So, a one year time limitation will likely be enforceable.
Question 5 – Are there different types of non-compete agreements?
Yes. Non-compete agreement can be separate, stand alone agreements signed between an employer and employee. On the other hand, the language from a non-compete agreement can simply be added to an employee contract. Whether the non-compete agreement is a separate contract or a clause in another contract, it will still have the same legal effect.
With that said, non-compete agreements come in 2 main different situations which can have a large legal difference. Non-compete agreements can be (i) signed by an employee with an employer or (ii) for the sale of a business. This article focuses on non-compete agreements in the employee-employer context (e.g. number (i)). If you sign a non-compete agreement for the sale or exchange of a business, a court is often more willing to enforce stricter provisions.
What does this mean? Well, if you sign a non-compete as an employee to refrain from competing with your former employer for 5 years it likely will not be enforceable because 5 years is generally too long. However, if you sign a non-compete agreement to last for 5 years as part of selling your business, it likely will be enforceable. Why? Because courts generally hold business owners to a higher standard and assume that business owners have more freedom to contract.
Question 6 – I signed a non-compete agreement after I started working. Is this non-compete agreement enforceable?
It depends. Whether or not the non-compete agreement is enforceable depends on the state in which you work, where you signed the non-compete agreement. The main issue here is whether you, as the employee, received any form of consideration for the non-compete agreement from your employer.
Some courts hold that consideration is satisfied just because you want to keep your employment, i.e. you will continue to make money as an employee. Other courts say that the employee must actually receive some form of additional consideration above and beyond continued employment, such as money, new benefits, etc.
Bottom line – check your local state laws.
Next, we’ll go over non-compete agreement questions 7 to 9.