What is a “non-compete” contract? And what should employers and employees consider when entering into such agreements?
Mark Alexander, a partner and trial attorney with the Gainesville, Ga. law firm Stewart Melvin & Frost, talks about what is a “non-compete” contract? And what should employers and employees consider when entering into such agreements?
Question: What is a non-compete contract?
Mark: It is a restrictive covenant or agreement between employer and employee. As a condition of employment, employer can require a new employee to sign an agreement that prevents the employee from competing against the company – for a certain time period or within a specified geographic region – after he or she leaves the company.
Non-compete restrictions also may apply to a list of the company’s customers that the employee is barred from soliciting for business if he or she ever leaves the company.
Question: If you are an employer, what do you need to know about non-compete contracts?
Mark: Often, an employer will “cut and paste” to create their own employment agreement and not consult with a lawyer. Once employee leaves the company, then the employer contacts an attorney – but by then, it can be too late.
Question: If you are an employee, what do you need to know about non-compete contracts?
Mark: Most employees don’t review until they have left and accepted a position with new company. It is better to know extent of possible restrictions on front end and certainly before you actually decide to leave.
Employees must be careful discussing their plans to leave with company’s customers before you actually leave. Common law duty of loyalty to the employer applies even if there is no restrictive covenant.