What is a noncompetition clause?

Imagine being offered a new and exciting job. But, the employer requires a California employment contract, a lengthy document, written by lawyers, with various clauses. And, one of these clauses is a noncompetition clause. However, before signing one should understand what a noncompetition clause means.

The interesting thing about a noncompetition clause, or a non-compete agreement, is that many employers include this type of clause in employment contract. Though, it does not usually take effect until after the employer-employee relationship ends. In addition, although many employers try to incorporate these into employment contracts, noncompetition clauses are generally disfavored by the courts. In fact, courts generally closely scrutinize these clauses when challenged in a legal dispute.

To be enforced, there are requirements that must be met. First, a non-compete agreement must be supported by consideration when it was signed. If incorporated into an employment contract, the promise of employment can be sufficient consideration.

Further, it must be for the purpose of protecting a legitimate business interest, and reasonable in scope, time and geographic location. And, there are a variety of factors to determine whether the clause serves a legitimate business interest, such as goodwill or trade secrets.

Finally, reasonableness is also key. In determining reasonableness, the court will balance the legitimate business interests of the employer with any burden that the agreement places on the employee.

If one is considering, or has already signed an employment contract with a noncompetition clause, it is important to consult with an experienced employment law attorney. The attorney can help one understand the terms of this non-compete agreement and any potential legal challenges.

Source: Findlaw.com, “Non-Competition Agreements: Overview,” accessed on May 15, 2018

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