Under what conditions is a non-compete agreement enforceable?

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Under what conditions is a non-compete agreement enforceable?

I’ve worked at my current company for 20 months. The company is a PR firm that specializes in marketing communications for franchises. Yesterday, I was handed a non-compete agreement. It says that I’m not allowed to be a part of a competing business (stock holder, owner, employee) of any marketing communications firms that has part of all of its business from national franchises during employment and for a period of 2 years following termination, regardless of circumstances. There are over 8,000 national franchises in the country. We represent 20. No consideration other than continued employment is being offered for my signature. Is this enforceable?

Asked on October 15, 2014 under Employment Labor Law, Texas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

An agreement like you describe is generally enforceable: it does not need to specifically state you are being given continued employment because that is an implicit reciprocal condition to such an agreement. As long as you are not fired or laid off--that is, as long as termination of employment is voluntary on your part (e.g. resignation or quiting)--the agreement will be enforceable against you. If you are fired or laid off, then the agreement is not enforceable.

The above said, two years is unusually long for a non-compete unless you are a senior executive. If you are not a senior executive, then were you to challenge it in court, there is a reasonable chance that a court would "blue pencil" it to reduce the duration to something more reasonable, such as 6 months.

And since a non-compete is only enforceable to the extent it is reasonbly necessary to spare the employer from a former employee's actual  competition, it is also possible--not a given, but possible--that if it were challenged, a court would blue pencil it to reduce it in terms of numbers or types of companies covered (e.g. maybe restrict it to franchise in similar industries to the ones the employer represents) or geographic scope.


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