An employee’s knowledge and skills are often seen as valuable assets to their employers. As such, employers have an incentive to keep their employees within their respective organizations. Despite this, sometimes the employer-employee relationship will nevertheless be terminated. When this happens, employers still have an interest in preventing their employees from taking the skills and knowledge they gained as a result of their previous employment and competing in the same market to the former employer’s detriment. It is with this set of interplaying incentives in mind that covenants not to compete are entered into.
A covenant not to compete, better known as a non-compete agreement, is a type of restrictive covenant. This is a fancy way of describing a contract in which one party agrees to restrain their ability to act, in exchange for some type of consideration (a benefit or thing of value). For example, people often purchase land with restrictive covenants attached that say they cannot utilize the land for certain purposes or in a certain manner. In the context of a non-compete agreement, the signing party agrees not to leave their employer and join/start a competitor in the same industry.
At times, non-competes have been viewed unfavorably as they inherently represent restraints on trade and labor. This is a fair criticism of non-compete agreements as they do exactly this. Accordingly, non-competes are still unenforceable in some states even today. Nevertheless, non-compete agreements are enforceable in both North Carolina and South Carolina.
By and large, the law of North and South Carolina regarding non-compete agreements is the same or very similar. For example, in each state, the basic elements required to have an enforceable non-compete are the same. The first element is that the non-compete itself must be necessary to protect an employer’s legitimate business interest. According to the discussion above, this will almost always be taken as a given. Next, the agreement itself must be limited in terms of length and geographic area. Just how long a time frame and how large a geographic area these agreements can cover are questions of fact and will be decided on a case-by-case basis. Third, non-competes cannot be overly burdensome such that it hinders the former employee’s ability to earn a living. In other words, we don’t want these restrictive covenants to be too restrictive. Additionally, the agreement itself must be deemed reasonable from a public policy standpoint (i.e. it must be consistent with public policy to protect the employers’ interest here). Finally, to be enforceable, the employee’s signing of the non-compete must be accompanied by adequate consideration from the employer.
If you are an employee who has signed a non-compete and would like to discuss your options concerning it, we are ready to walk you through your choices. Alternatively, if you are an employer who would like to discuss implementing a non-compete agreement into future contracts, we are prepared to guide you through that process as well. Regardless of what position you find yourself in concerning non-compete agreements, our talented and dedicated team of attorneys and case managers stand ready to assist you every step of the way. Call us today at (888)-748-KING (5464) to schedule a consultation at one of our western North Carolina or upstate South Carolina offices.