If I was let go at work due to reduction of force, is the non-compete still valid?

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If I was let go at work due to reduction of force, is the non-compete still valid?

Asked on January 10, 2013 under Employment Labor Law, South Carolina


M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Here is the law in South Carolina Court governing non-compete clauses/contracts:

           Covenants not to compete contained in employment contracts are generally disfavored and will be strictly construed against the employer.  A restriction against competition must be narrowly drawn to protect the legitimate business interests of the employer.  A covenant not to compete will be upheld only if it is:

          (1). necessary for the protection of the legitimate interest of the employer;

          (2). reasonably limited in its operation with respect to time and place;

           (3). not unduly harsh and oppressive in curtailing the legitimate efforts of the employee to earn a livelihood;

          (4). reasonable from the standpoint of sound public policy; and

          (5). supported by a valuable consideration.

         * * * *
         If a covenant not to compete is defective in one of the above referenced areas it is totally defective and cannot be saved.

Being let go does not have a bearing on its validity unless it deals directly with the contract.  So I would speak with ana ttorney and bring the employment contract with you.  Good luck.

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

For a definitive answer, you should have an attorney review the non-compete with you, since non-competition agreements--like any other contracts--are governed by their specific language.

That said, as a general matter:

1) If you received some "consideration" (basically, benefit or payment) for signing the agreement above and beyond your employment and normal wages--for example, the company gave you (or agreed to give you, even if you haven't received it yet) some bonus, severance, or other payment for signing, then the agreement is still enforceable.

2) If you did not receive any additional or separate consideration for signing the agreement, but rather simply had to sign it as part of, or to keep (or get your job), then the agreement would generally NOT be enforceable when you are RIFed, since the loss of your job means that the company has breached its agreement (to let you keep working in exchange for the non-compete) and also that there is a failure of consideration (since  you are now not  receiving any benefit in exchange for the non-compete).

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