Many of the most successful and best-compensated professionals have to sign very thorough employment contracts. They negotiate terms in advance that govern everything from severance packages to performance-related bonuses.
Frequently, white-collar professionals, including executives and engineers, also need to sign non-compete agreements. Also known as covenants not to compete, noncompete agreements restrict the economic activity of an employee even after they end their employment relationship with a business.
In some cases, former employees hoping to start a business may need to relocate to avoid noncompete enforcement attempts in the civil courts.
Noncompete agreements should be reasonable
Noncompete agreements generally need to meet certain legal standards to be enforceable via litigation. Typically, the employee agreeing to limit future economic activity should receive something of valuable consideration in exchange for giving up their right to compete.
Additionally, the noncompete agreement should include appropriate limitations. Typically, employers have to set a specific geographic area where the agreement applies and limit the time during which they can enforce the agreement.
It is common for non-compete agreements to limit the option of starting a competing company or working with a direct competitor for two or three years, possibly longer in special circumstances. Additionally, there need to be geographic limitations on the agreement. In some cases, relocating to exit the area covered by the agreement is a more effective solution than waiting for the noncompete agreement to expire.
Professionals limited by noncompete agreements may need help evaluating their options, and that’s okay. Learning about the rules that govern noncompete agreements and their enforcement can help aspiring entrepreneurs move on, despite agreeing not to compete against an employer previously.