In the world of employment and business, competition is usually something good, but so is collaboration. In high school economics class, when you are first learning how the economy functions, you usually learn about the importance of market competition; it keeps prices from going too high, and it provides an incentive for businesses to provide value to customers, because they are competing for revenue from those customers. You also learn about laws to prevent monopolies, as well as companies that virtually monopolize certain industries in practice, despite antitrust legislation.
Once you have participated in entrepreneurship, though, you understand that collaboration counts for as much as competition. How do you balance the two? Can someone simultaneously be your teammate and your rival? You can accomplish much of this through written agreements. Individuals and companies can sign legally binding agreements promising to work together and others in which they promise to stay out of each other’s way. This is the environment that gives rise to the non-compete agreement. The Bozeman non-competes lawyers at HKM Employment Attorneys LLP can help you draft a non-compete agreement or decide whether to sign a contract that includes non-compete provisions.
Non-Competes and Other Types of Agreements That Restrict Business Activities
A non-compete agreement can take place between two former business partners or between an employer and an employee. Pursuant to the agreement, the former partners promise not to conduct business in ways that they are seeking to attract customers away from each other. This could mean that they promise that, in subsequent business ventures, they will not sell the same kind of products as each other. For example, if Bob and Mike’s Burgers and Shakes restaurant closes, the former partners may sign a non-compete agreement, in which Bon promises that, for the next two years, he will not open a burger restaurant within a 20-mile radius of Bozeman, and Mike promises that, for the next two years, he will not open an ice cream parlor within a 20-mile radius of Bozeman. The former general manager of Bob and Mike’s may promise, in her non-compete agreement, that she will not manage another fast casual restaurant within the same geographic area within the same time period.
If your first response is that non-compete agreements are contrary to the spirit of free market competition, plenty of economists and lawmakers agree with you. The good news, and the more practical way of looking at this, is that non-compete agreements are not the only way to protect yourself from your former associates using your closely guarded and lucrative ideas against you. You can register intellectual property rights, such as trademarks and patents, so that no one, regardless of whether they have previously worked with you, can benefit financially from your ideas without your permission. Another possibility is to sign a non-disclosure agreement (NDA). Whereas a non-compete agreement restricts the business activities you can conduct, an NDA only specifies which information you learned during your work with the other party you may not reveal for a set period of time after your relationship with the other ends. Therefore, NDAs about business are generally less restrictive than non-competes.
What Determines Whether a Non-Compete Agreement is Legally Valid?
The short answer about the validity of non-compete agreements is “it depends.” The courts of Montana can decide on a case-by-case basis whether to enforce non-compete agreements or non-compete provisions in an employment contract when the parties to litigation ask them to rule on such questions. Montana case law tends toward the courts ordering former employers not to restrict the labor participation of their former employees. This means that they usually refuse to enforce non-compete clauses that restrict the employment that former employees can seek or the business ventures that former employees can establish. The shorter the duration of the non-compete provision, the more likely it is to be enforceable. Likewise, the more specific the restrictions and the smaller the geographic area, the more likely the court is to enforce the non-compete clause. Montana law allows blue penciling of business contracts, where the court can declare one provision of a contract unenforceable while maintaining that the rest of the contract is legally valid.
Non-compete provisions in employment contracts were once widespread. In 2021, when President Biden issued an executive order condemning abusive non-compete provisions, one out of every five employees who had an employment contract but did not hold a bachelor’s degree was subject to non-compete provisions in their contract. The executive order stated that non-compete agreements are only appropriate when the employee’s work would have made him or her a party to trade secrets that would enable the employee to compete directly with the employer. Simply working in the same industry in the same city does not count as unfair competition. The executive order aimed to eliminate “you’ll never work in this town again” provisions; it is patently unfair to hire a nurse on the condition that, if she quits working for your hospital, she can never practice nursing in Bozeman again.
Should You Sign a Non-Compete Agreement if Your Employer Asks?
If an employer offers you a contract, it makes sense not to look a gift horse in the mouth and not to nitpick too much about the content of the contract, because so many workers only wish they could have the job stability that an employment contract brings. Despite this, it is worthwhile to read the non-compete provisions of your contract carefully, if it includes them. Even if your employer is not willing to remove the non-compete provisions entirely, it is worth negotiating about them to persuade your employer to make the non-compete provisions less restrictive. An employment lawyer can help you think through the implications of the non-compete provisions in your contract and negotiate with your employer about them.
HKM Employment Attorneys for Non-Compete Agreements
The Bozeman employment lawyers at HKM Employment Attorneys LLP, can counsel you about non-compete provisions in employment contracts. Contact the employment lawyers at HKM Employment Attorneys LLP in Bozeman, Montana, to set up a consultation.
