Is a non-compete agreement signed after working on the job and covering the entire United States legal and enforceable?
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UPDATED: Jul 31, 2017
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Your employer’s non-compete/solicitation agreement is not enforceable because it covers the entire country. It has to be limited in scope and limited in geographic proximity. Even if your position in both new and old companies is the same, such as sales, a distinction can be made if one position is with a reseller and the other with a manufacturer. Therefore, there should not be a conflict.
There are two different issues here, each to be discussed separately.
The first is whether a non-compete agreement is legal and enforceable if it is signed after you start working at a job. The answer to that question is “yes.” Remember, all employment in this country is “employment at will” unless and only to the extent that you have a written employment contract guarantying your employment. Since most of us do not have written employment contracts, for purposes of this article, we will assume that there is none. In that event, “employment at will” means you have no rights to your job, and you could be terminated at any time, for any reason whatsoever—including not signing a non-compete. Therefore, as an “employee at will,” it doesn’t matter if you have already been working at the job—you still don’t have a right to it, and in fact have no more right to the job than a job applicant has to be hired in the first place. Since the employer could terminate you for not signing, the situation is exactly the same as if they gave you the agreement to sign before hiring you—and would only hire you if you did sign it. Accordingly, a non-compete signed after you have been working is just as enforceable as one signed pre-hiring.
The second issue then becomes whether an agreement covering the whole United States is enforceable. The answer to that question is, “not as written, but courts can limit it so that is enforceable on a smaller scale.” While non-competition agreements are generally enforceable (though there are a very small number of states which do not enforce them at all; always check the law of your particular state), courts still do not like them, because they interfere with employees’ freedom to work for whomever they want (that freedom is another aspect of “employment at will). They are also seen as being against public policy, since if they prevent someone from working at all, they could throw him or her onto public support (e.g., welfare). Increasing the number of people on public support is not this country’s policy.
Balanced against that, though, is the fact that businesses are seen as having a legitimate interest in preventing someone from turning right around, as soon as they leave employment, and using information or skills they only learned for their employer’s benefit to compete with that employer. Courts try to balance these opposed interests by enforcing non-competes only to the extent reasonably necessary to provide an appropriate level of protection to the former employer. This means that courts will modify non-competes so that they only bar competition within a reasonable area necessary to protect the employer from competition for its natural customer base. That area will vary by the industry and job. For example, hair styling tends to be local, so a non-compete for a stylist might only be a few miles radius—most people won’t drive more than few miles for a haircut. A non-compete for an office equipment salesperson, however, could encompass an entire large city or even a few counties, since you typically only have one salesperson for an area that size, and a company reasonably sells to that entire area. But whatever the appropriate geographic area for your industry and job, it’s not the whole United States, If the former employer tried to enforce this agreement against you, a court would “blue pencil” it to reduce it to the appropriate area to protect the employer while still giving you a reasonable opportunity to work and support yourself outside that area.