Competition is an essential component of every market economy, so why are non-compete agreements so prevalent in employment law? Honest business dealings rely on fair competition. In a perfect world, all businesses would have the same information about market conditions, and wise use of their resources to provide value for customers at an affordable price for themselves would enable the business to thrive. Trade secrets are an important part of business, too.
Someone with sufficient culinary knowledge could probably figure out by process of elimination what the 11 secret herbs and spices in KFC’s original recipe chicken are; after all, there are only so many seasonings in the culinary repertoire of the Southern United States of the mid-20th century, and by process of elimination, you could eventually figure out which 11 they were.
You would have a harder time figuring out the exact proportions or when and how you combine them with the other ingredients, though. The only way for you to find out for certain would be if someone who had seen the recipe spilled the secret; this is the kind of competition that non-compete clauses aim to prevent.
Our non-compete agreement lawyers in Huntsville, Alabama, can help you find out whether a non-compete agreement you have signed is legally enforceable and help you protect your intellectual property in the event that an employer wants you to sign a non-compete agreement.
What is the Role of Non-Compete Agreements in Employment Law?
A provision in a contract that prohibits one party from engaging in a business activity that competes with the other is known as a non-compete provision or a restrictive covenant. Restrictive covenants can form the entire body text of free-standing agreements, or they can be part of an employment contract. They are analogous to exclusivity provisions in contracts between the manufacturer of a product and its local distributors.
In an employment contract, a non-compete clause typically says that the employee may not set up a business that competes directly with the employer while the employee is working for the employer or for a certain length of time after the employment relationship ends. Employers often want employees to sign non-compete agreements when the nature of the employee’s work would require the employee to find out trade secrets or other confidential information, such as the contact information and business needs of clients. If the employee wanted to cause financial harm to the employer, the employee could simply take this information and use it to start a new business that competes with the employer and caters to the employer’s clients. Non-compete clauses make the employee promise not to do that.
How Restrictive Can Restrictive Covenants Be in Alabama?
It is easy to imagine how non-compete agreements can unfairly restrict the professional activities of former employees. For example, some non-compete provisions prohibit employees from seeking employment with another existing business that competes directly with the employer. If you are a pediatrician and you leave your current job, what else are you supposed to do except find another job as a pediatrician working for another physician group or hospital? Does your employer expect you to train for a whole new career or move to another state, where you will need to apply for a new medical license? At their worst, non-compete provisions come across as sounding like “you’ll never work in this town again” provisions.
Alabama courts will only enforce non-compete clauses in employment contracts if the employee was working in a role that made him or her party to confidential information.
The clause should be specific about the timeframe and geographic location in which the employee may not set up a new business or work for competitors after ceasing to work for the current employer; a reasonable timeframe is no more than two years.
In the past few years, the Federal Trade Commission has increasingly taken action against excessively restrictive non-compete agreements. For example, in 2021, more than 20% of employees who had employment contracts but did not hold bachelor’s degrees were subject to non-compete agreements. The FTC reasoned that these non-compete clauses were inappropriate because it was unlikely that these employees’ jobs were so specialized that they would be party to confidential information about the employer.
Resolving Disputes Arising From Non-Compete Agreements
Excessively restrictive non-compete agreements in employment contracts often amount to wishful thinking on the employer’s part; employers think they can stop you from getting a new job just by making you sign a non-compete agreement, much as roller skating rinks think they can stop customers from suing if they get injured just by making them sign liability waivers. In practice, employers who ask you to sign non-compete agreements will not sue you if you get a new job. If they threaten to sue you because of your new job or new business venture, consult the Huntsville non-compete lawyers at HKM Employment Attorneys, LLP, to find out whether your former employer is within their rights to sue.
Even better, the best time to resolve ambiguities is before you sign an employment contract that includes a non-compete clause. When an employer offers you an employment contract, they should give you ample time to read it with a lawyer before you sign. Negotiating your contract is a worthwhile use of your time and money because it will protect your rights in the long term. Your employment lawyer might be able to persuade your employer to remove the non-compete provision from your contract or at least to make it less restrictive. Even if your contract does not have a non-compete provision, it is still a good idea to review it with a lawyer before you sign.
Contact HKM Employment Attorneys, LLP, About Hostile Work Environment
The Huntsville employment lawyers at HKM Employment Attorneys, LLP, can give you advice about non-compete agreements and employment contracts that contain non-compete provisions. Contact the employment lawyers at HKM Employment Attorneys, LLP, in Huntsville, Alabama, to set up a consultation.
