What Employers Need to Know About Non-Compete Agreements

Non-compete agreements are valuable tools for protecting a company’s business interests, confidential information, and client relationships. However, these agreements must be carefully crafted to comply with North Carolina law and to withstand scrutiny in court. For employers, understanding the legal framework and best practices for non-compete agreements is essential to enforce their validity and protect competitive advantage.

What Are Non-Compete Agreements?

A non-compete agreement is a contractual clause that restricts an employee from engaging in activities that compete with their former employer’s business for a specified period, within a defined geographic area. These agreements are typically used to:

• Protect trade secrets and proprietary information.
• Safeguard client relationships.
• Prevent unfair competition by former employees.

Enforceability of Non-Compete Agreements in North Carolina

North Carolina courts carefully scrutinize non-compete agreements to ensure they are reasonable and not overly restrictive. To be enforceable, these agreements must meet the following criteria:

1. Protect a Legitimate Business Interest: Employers must demonstrate that the restriction is necessary to protect their trade secrets, goodwill, or client relationships.
2. Be Reasonable in Scope: The agreement must have reasonable limitations on geographic area, duration, and the scope of prohibited activities.
3. Be Supported by Consideration: Employers must provide something of value to the employee in exchange for signing the agreement. For new hires, this is typically the offer of employment; for existing employees, additional compensation or benefits may be required.
4. Avoid Overbroad Restrictions: Courts will not enforce agreements that impose unnecessary burdens on an employee’s ability to work.

Best Practices for Employers

1. Tailor Agreements to Specific Roles
   Generic, one-size-fits-all non-compete clauses are more likely to be challenged. Tailoring agreements to the specific role and responsibilities of each employee increases the likelihood of enforceability.
2. Clearly Define Terms
   Ensure that the agreement specifies the geographic area, time frame, and types of activities prohibited. Ambiguity can lead to disputes and may render the agreement unenforceable.
3. Include Severability Clauses
   A severability clause allows courts to modify overly broad provisions without invalidating the entire agreement. This protects the enforceability of the agreement even if certain terms are deemed unreasonable.
4. Review Agreements Regularly
   Changes in business operations, employee roles, or legal standards may necessitate updates to non-compete agreements. Employers should review these contracts periodically to ensure compliance and relevance.

Legal Challenges and Employer Considerations

Non-compete agreements are often contested in court, particularly when employees argue that the restrictions are too burdensome or unnecessary. Employers must be prepared to justify the agreement’s terms and demonstrate its necessity. Proactive legal counsel can help employers draft agreements that are both effective and defensible.

Robinson & Lawing’s Experience in Employment Law

At Robinson & Lawing, LLP, we  advise employers on drafting, enforcing, and defending non-compete agreements. Our attorneys understand the complexities of North Carolina employment law and work closely with clients to protect their business interests while ensuring legal compliance.

Attorneys who handle these types of employment matters include:

• H. Brent Helms
• W. Mark Peck
• Eleasa Harris Allen
• Bryan C. Thompson
• Jeremy Demmitt
• Mitchell R. Bledsoe

Whether you need to create a new agreement, update existing contracts, or resolve disputes, we provide strategic guidance and skilled advocacy.

Protect Your Business with Effective Non-Compete Agreements

Non-compete agreements can be a powerful tool when used correctly. Contact Robinson & Lawing, LLP today to learn how we can help you safeguard your business interests and navigate the complexities of employment law.