In business contracts, a non-compete clause restricts a previous employee from working in a geographical area for a specific amount of time. This prevents them from competing with the employer’s business.
Although they can seem set in stone, non-compete clauses can sometimes be negotiated or challenged, such as if the employee doesn’t feel they’re fair.
ContractsCounsel, an online legal marketplace, connects clients with experienced lawyers who can help them understand and negotiate their non-compete contracts, which is especially crucial if parties are involved in a dispute.
Read the rest of this article to learn more about non-compete clauses, how disputes can arise, and how to resolve them out of court.
What Causes Non-Compete Clause Disputes?
It’s common for non-compete disputes to arise from the following:
- Breach of the contract. This occurs when the employee violates the agreement’s non-compete terms.
- Enforceability. The employer and employee might clash about the validity of the non-compete.
- Unreasonable clauses. Non-compete clauses might seem unreasonable, putting excessive or unfair restrictions on the employee.
- Ambiguous clauses. If the non-compete agreement is written in a vague or confusing way, this can cause misunderstandings and conflict.
What Should You Do in a Non-Compete Dispute?
Whether you’re an employer or employee, there are some things you should do if you find yourself in a non-compete dispute. Stay prepared and strive to resolve the issue as quickly as possible.
Learn Your State Laws
State laws control non-compete agreements, so you should learn about them before challenging the contract. Some states don’t enforce non-competes or only enforce them in certain ways.
Gather Evidence
In situations where your previous employer is arguing with you because they think you’ve breached the contract, collect evidence that this is not the case. For example, you could get a copy of a contract with your current employer to show that it doesn’t violate your previous agreement.
Refer to the Non-Compete Contract
If the non-compete contract had vague or confusing terms, or unreasonable expectations, you might be able to challenge it. Your lawyer will be able to help you.
An example of an unreasonable non-compete clause is if the employer doesn’t do business in a certain location but expects employees not to work there.
Courts generally examine how reasonable a non-compete contract is, so they’ll look at the following terms and clauses:
- Geography. What geographic location is covered by the clause?
- Duration. For how long do the restrictions last?
- Activity scope. What activities are prohibited by the non-compete?
Check the Employer for Breach
Perhaps the employer didn’t live up to their contractual obligations, which could prevent you from having to follow the non-compete contract.
Get a Copy of the Contract
You might not remember signing the non-compete agreement, even if your employer behaves as if you did. It’s worth requesting a copy so that you can check. If you didn’t sign the agreement, you’re not bound to its terms.
How Can You Negotiate Your Non-Compete Contracts?
Knowing how to negotiate your non-compete agreement can help to prevent disputes in the future.
Reduce the Non-Compete Duration
If the duration of the non-compete is less than one year, this tends to be favored by the courts. Anything more than that can be viewed as unreasonable.
Narrow the Location Scope
It’s unfair for the non-compete agreement to place unreasonable restrictions on where the employee can work, such as if it declares the employee can’t work for any similar business in the entire state.
Avoid Extreme Industry Restrictions
The agreement should concentrate on specific industries or activities that are prohibited by the employer, not include broad restrictions that affect completely unrelated ones.
Suggest Contract Alternatives
As an employee, you might not feel right about signing a non-compete agreement, especially if it doesn't limit scope, location, and activities. You or your lawyer could suggest using a non-solicitation contract instead.
How Can You Legally Enforce a Non-Compete Contract?
If you’re the employer in a non-compete dispute, you might be wondering how to enforce the agreement. Here are some tips.
Confirm the Contract is Reasonable
A lawyer can help you check that the agreement has reasonable terms that you can enforce without issues. There have been instances of courts rejecting non-compete contracts that are too vague or broad, so this is something to look out for.
Gather Important Evidence
If your previous employee has breached the non-compete, you should gather as much evidence of this as you can, such as if you have proof of them trying to solicit your clients.
Send a Cease and Desist Letter
Your lawyer can draft a cease and desist letter to send to the employee, demanding that they stop their actions which are in violation of the contract.
Should the employee not comply with your demands, you can file a lawsuit to legally stop them.
What are Your Legal Options for Resolving Non-Compete Disputes?
Both employers and employees can explore different legal options for resolving non-compete disputes.
Negotiation
Set up a meeting with the other party so you can try to resolve the dispute. Speak openly and civilly so that you give each other the opportunity to air your concerns. You might be able to reach an agreement, such as by modifying the contract.
Mediation
If you and the other party can’t reach an agreement, you should consider mediation. This involves hiring a third party mediator to oversee your negotiations and encourage you to explore solutions for the problem. Mediation is cost-effective and settles the dispute without going to court.
Should You Hire a Lawyer for a Non-Compete Dispute?
It’s always advisable to work with an employment lawyer to help you navigate a non-compete dispute. They will be able to assist you with all aspects of the process, such as:
- Contract review. A lawyer will check if your non-compete agreement is enforceable.
- Resolution methods. They will consider the best solutions to present to your employer/employee.
- Legal compliance. With extensive knowledge of non-compete laws in your specific state, they will ensure you remain on the right side of the law.
- Litigation. If other methods don’t resolve the dispute, your lawyer will represent you in court.
Do you need a lawyer for a non-compete dispute?
Work with a vetted employment lawyer on ContractsCounsel. They’ve got years of experience in drafting and reviewing non-compete contracts. They can also help you navigate a non-compete dispute so you can enforce or negotiate it effectively.
