With the economy doing well and unemployment low, companies are competing for employees. When entering an employment agreement, one area to consider is a “non-compete” clause.
A non-compete contract is a restrictive covenant or agreement between employer and employee. As a condition of employment, the 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.
Often, an employer will create their own employment agreement and not consult with a lawyer. Once the employee leaves the company, then the employer contacts an attorney but by then, it can be too late.
From the employee’s standpoint, most employees don’t review the contract until they have left and accepted a position with new company. It is better to know the extent of possible restrictions on the front end and certainly before you decide to leave.
Employees must be careful discussing their plans to leave with company’s customers. Common law duty of loyalty to the employer applies even if there is no restrictive covenant.
As an employer or employee, know and understand what’s in the contract and what restrictions are in place.