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2 ways to restrict a non-compete agreement

On Behalf of | Mar 30, 2023 | Executive Employment

There has been talk about banning non-compete agreements. Some states already do not allow them to be used. But, as of right now, these agreements are still legally permissible as long as they’ve been set up correctly.

What a non-compete agreement does is that it simply restricts where someone can work once they leave the job that they have. They are not allowed to directly work for the competition. They may also not be allowed to start a company that then becomes the competition. This is a way to protect the original employer – which is precisely why these are controversial.

Geography and time

There are two major ways in which these agreements have to be restricted, however. The first is geography. An employer may be able to say that a worker can’t go to the competition in the same city or the same area. But they generally cannot say that all competing businesses are off-limits. A non-compete agreement that is this broad would likely not stand in court. It would make it impossible for that former employee to find gainful employment. 

The second restriction should be on time. These agreements are not supposed to stand forever. An employee may be told that they can’t immediately go to the competition within the first 12 months, but saying that they can never work in the industry again is not allowed.

This is a complex area of employment law, and that’s why it’s so important for employers to understand their legal options and obligations. Using these types of contracts and agreements properly is crucial if they are actually going to be upheld.