Non-compete agreements are designed to protect companies. Non competition contracts can be written to protect a wide variety of company interests including trade secrets, preventing employees from divulging sensitive information to competitors that would make them unable to compete fairly. Non compete clauses can even restrict employees from working for certain companies, in certain cities, and in some industries for a specified length of time. However, some non compete clauses violate employee rights or may be deemed unenforceable for other reasons.

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If you have been offered employment but need help negotiating the terms of a non compete agreement we can help. We can also help employers draft no compete agreements, and help both employees and employers with non compete violation claims.  Call Baron & Budd today to speak with a non compete agreement lawyer with experience handling complex employee contract litigation.

No Compete Contract Cases We Handle

  • Enforceability Issues
  • Non Compete Agreement Violations
  • Contract Audits & Review
  • Non Compete Agreement Drafting
  • Non Compete Contract Negotiations

And much more. We handle non competes for both employers and employees, and our experienced employee contract attorneys are known for their ironclad agreement drafting abilities.

What Should You Know About Non-Compete Agreements?

There are no federal laws regarding non compete clauses, each state has specific rules and regulations that non compete agreements are enforced and guided by. In today’s tech-centric business environment, trade secrets and proprietary business information is more closely guarded than ever.

Most organizations require their employees to sign non-disclosure, non-compete, or confidentiality agreements in which they promise to avoid revealing certain information or attempting to solicit the organization’s clients for a period of time after employment is terminated. According to an article by PBS, 20% of American workers are bound by some type of non compete agreement.

When employment ends on amicable terms, these agreements are unlikely to cause issues; however, when an employer is alleged to have retaliated against an employee or engaged in discriminatory behavior, the non-compete agreement can become a pivotal part of the case. Non compete agreements can impact (and even be impacted by) employment discrimination claims. 

What activities are prohibited by non-compete agreements?

Most non-compete agreements will contain language outlining the employee’s duties with the employer, the employee’s restriction on disclosing any confidential or proprietary information (during or after employment), and the employee’s restriction on obtaining employment or contract work with certain competitors for a specified period of time. This is designed to protect the employer’s trade secrets while also minimizing the risk that the employee may “poach” the employer’s customers after building up a business relationship with them. Certain states, like California, have taken a strict view of these agreements, essentially rendering them unenforceable unless they involve the purchase or sale of a business.

Some non-compete agreements may delve into specifics; sometimes even listing the names of each of the businesses or employees who may not be contacted or solicited for a certain period of time after the employee leaves the employer (whether voluntarily or involuntarily). In general, the more specific the agreement’s contents, the more likely it is to be upheld in court; broadly-written agreements that could conceivably be interpreted to completely prevent the employee from working in his or her chosen field are likely to be struck down as being unenforceably vague.

What types of provisions cannot legally be contained in a non-compete agreement?

There are specific clauses that can’t legally be included or enforced in non compete agreement contracts.

  • Employees cannot waive discrimination rights
  • Employees cannot be restricted from filing EEOC complaints
  • Geographic restrictions cannot be unreasonable
  • Agreements cannot restrict an employee’s ability to get another job in the same occupation
  • Unrealistic time restrictions cannot be enforced

For example, employees cannot be required to waive their rights to be protected against discrimination or unlawful wage and hour practices; therefore, a non-compete agreement that purports to waive the employee’s right to file a complaint with the EEOC or Department of Labor’s Wage and Hour Division if the employer engages in harassment may be unenforceable.

On the other hand, the principal of severability can mean that a contract may be upheld even if one or more of its provisions is deemed unenforceable. As long as these provisions don’t affect the rest of the contract if removed or ignored, the rest of the contract will stand on its own.

Of all restrictions in a non-compete contract, the most important are the geographic & time restrictions. If either is found to be unreasonable, none of the contract can be deemed enforceable.

Other factors that make a no compete agreement unenforceable are issuing a no compete agreement to an employee misclassified as a contractor, and not offering “consideration” in return. A consideration is some type of compensation or value, such as an employment contract offering a sum of money, an added bonus or retirement benefit, or even in-office perks such as gym access or childcare services.

What are the potential penalties for breaching a non-compete agreement?

The penalties for breach of a valid non-compete agreement are often contained in the agreement itself, but are generally limited to monetary damages. Even if a non-compete agreement doesn’t outline remedies, an employer seeking to enforce this agreement can do so by filing a claim in federal or state court.

Once the non-compete violation is filed, the case will be heard before a judge or jury to determine what, if any, damages exist and whether your employer is entitled to recover a judgment. In some cases, a court may issue injunctive relief — for example, instructing the employee to cease communication with one of the employer’s clients or stop work on any contracts he or she has entered into in violation of the agreement.

How can the existence of a valid non-compete agreement affect an employment discrimination claim? 

Non-compete agreements can often come into play in the employment discrimination context; an individual who was pushed out of a job due to discrimination or who quits after being subjected to a hostile work environment may not feel as though he or she should be required to abide by the terms of a non-compete agreement, especially when that impacts their ability to find further employment.

However, a non-compete contract breach can give rise to its own independent civil claim. While the existence of a hostile work environment can serve as a defense for breaching a non compete agreement, on its own it may not be enough for a worker to escape liability. If an employment discrimination claim exists simultaneously with a non-compete agreement, seeking legal counsel before taking any action can be the most prudent course.

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Call Baron & Budd today or send us an email to schedule a free consultation with a non-compete agreement lawyer. Whether your employee has violated the terms of a non compete contract or are considering employment, we can help. Our employment law attorneys have decades of experience handling employee contracts like non competes, non-disclosures, and employment severance contracts and we can help.

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