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Comprehensive Legal Services For Businesses

In New Jersey And New York call
201-957-0874

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Business Law Professionals

3 things that may render a non-compete agreement invalid

On Behalf of | Sep 13, 2022 | Commercial Litigation |

A non-compete agreement or clause offers protection from competition by a business seller or former employee. It generally prohibits direct or indirect competition, and, in the case of leaving employees, working for a competitor.

According to CBS News, 50% of companies had their workers sign such an agreement in 2019. While having a non-compete agreement or clause is not uncommon, enforcing one may cost a business a considerable amount of money and time. Furthermore, if the contract does certain things, it may not be enforceable at all.

1. Causes undue stress to the signee

A non-compete agreement must be reasonable. It cannot last an unreasonable amount of time and can only cover a reasonable region. One that restricts the leaving worker from working for a certain type of company anywhere is unreasonable. One that restricts the worker from employment with a competitor in an area where the company has interests is more reasonable.

2. Fails to shield the legitimate interests of the company

The main concern of many companies when it comes to employees working for competitors is the protection of trade secrets and intellectual property. For instance, preventing a worker from stealing customers for a competitor is an example of protecting a business’s legitimate interests.

3. Harms the public

Non-compete agreements must not be harmful to the public. For instance, they must not have harmful long-term effects on the availability of certain products from a sector or have any impact injurious to the public.

Non-compete agreements cannot apply any restrictions a business desires. They must be reasonable for the leaving employee and the public and protect real interests or they may be invalid.