What Is the Implication of a Non-Compete Agreement?

What Is the Implication of a Non-Compete Agreement?
non-compete-agreement

Non-compete agreements are becoming more common in the business world, especially in the tech space. This is because employers want to keep their former staff from entering the same market and competing. Another reason is protecting confidential information and preserving customer accounts.

So, in essence, non-compete agreements protect the business owner and leave the employee at a disadvantage. This article looks at the implications of signing a non-compete agreement when entering into an employment contract. We’ll also look at the provisions of the Connecticut law.

If your employer asks you to sign a non-compete, contact our Connecticut employment lawyers immediately. We’ll review the provision and let you know if it’s in your best interest to sign such an agreement.

What Does It Mean To Sign a Non-Compete Agreement?

A non-compete agreement is a contract between an employee and their employer. The employer may present it as a clause in your employment contract or as an independent agreement. Also, you may sign it at the beginning of the working relationship or when you’ve already resumed your position.

Signing a non-compete agreement means signing away your rights to do or act in certain capacities for a specific time. Subject to the contract terms, you will not work for your employer’s competitor after your time with them. There are different types of non-compete agreements. They include:

  • Non-Competition Agreement: This is the most common and used by businesses to protect trade secrets, operations, products, or services.
  • Non-Solicitation Agreement: It prevents employees from contracting or soliciting business from their previous employer’s clients and customers, both past and present.
  • Non-Disclosure Agreements (NDA): A NDA keeps you from disclosing your former employer’s trade secrets or other sensitive information with third parties. While it is not strictly a non-compete, it goes hand-in-hand with one.

Most typical non-competes run for two years. Within that time frame, the employee must not work for the previous company’s competitor. When the two-year period elapses, they are free to do as they please.

As Connecticut employment lawyers, we’ve seen several people try to break out a non-compete before the time agreed upon expires. This is because most employees fail to consider the full effect of a non-compete agreement when signing one. The problem starts when they don’t like the working environment or fall out of favor with their employer.

At this point, the employee gets a better offer from a competitor only to find that they cannot accept the job offer. If they do, they will violate the non-compete agreement, and the previous employer can sue for breach of contract. So, again, ensure you get legal guidance before signing this agreement.

What Is the Legal Requirement for a Non-Compete Agreement? 

Under Connecticut law, for a non-compete to be enforceable, it must be beneficial to both the employee and the employer. In essence, a non-compete agreement that keeps employees from working and providing for their families is voidable. Thus, to ensure fairness, legal precedent laid down five criteria the courts must consider.

They are:

  • Whether the specified restriction time is reasonable
  • The reasonability of the geographic area covered by the agreement
  • The overall fairness of the agreement to the employer in comparison to the employee
  • The extent the employee can pursue their occupation if the restriction gets enforced and while it exists
  • The extent of the agreement’s interference with public interest

If the non-compete is unreasonable under any of these heads, the employer might be unable to enforce it. Let’s consider time restrictions. If an employer stipulates an indefinite time restriction, it will undermine the non-compete agreement. Geographical location is another place the courts focus on.

If an employer makes a non-compete application nationwide, the court will not accept it. For the agreement to stand, it must only apply to the place where the employer conducts business. So, you can’t have your business in Connecticut and ban your employee from working for someone in the same industry throughout the country.

Also, some agreements specify geographical restrictions. For example, the employer may say, within 100 miles of Hartford. Thus, a non-compete agreement over and beyond the bounds of what’s reasonable will not stand.

Consult Our Expert Connecticut Employment Lawyers Today!

There are two ways our employment attorneys at Aeton Law can help you. The first is evaluating a non-compete agreement and rendering legal advice before signing. The second is representing you while trying to get out of the agreement. This also includes representing you in a breach of contract lawsuit.

By engaging our services, you can be sure of making the right decisions and mitigating the fallout of breaching a non-compete. So, contact us today to speak with one of our attorneys about your case.

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