Many American workers are asked to sign noncompete clauses when they begin working with a new employer. These clauses prohibit them from working for their employers’ competitors for a specified period of time after ending their employment with the company. In most cases, this type of clause is legal and enforceable. When such a clause is too restrictive, the court may deem it to be unenforceable.
The purpose of a noncompete clause is simple – to protect an employer’s investment in its workers by keeping them from using those skills to work for their competitors. It can be quite expensive to train an employee, especially when the employee needs a highly specialized skillset or knowledge of proprietary hardware or software. Traditionally, noncompete clauses were reserved for senior-level workers and those working in technical positions. Since the 2008 recession, though, they have become more common among all types of worker. By 2014, approximately 20 percent of American workers were bound to some type of noncompete clause.
Legal Limits of a Noncompete Clause
A noncompete clause cannot entirely prevent an individual from working in their field. An effective noncompete clause protects the employer’s investment in the worker as well as the worker’s rights to seek fulfilling employment. A legally enforceable noncompete clause must meet the following criteria:
- It must be reasonable in terms of the geographical scope and period of time following the end of the worker’s employment that they are prohibited from seeking a new job.
- It must be reasonable in terms of the type of work the employee is prohibited from seeking after ending their employment with the original company. For example, it may bar the worker from holding the same title at a competing company, but it cannot keep them from working in the industry at all.
- The clause must protect legitimate business interests. It may be used to protect confidential company information by keeping the worker from seeking employment with a competitor for the length of time that information is relevant. If the worker has no specialized skills or knowledge that can potentially be used to harm the company by applying them at a competing company, there might not be a legitimate reason to ask them to sign a noncompete clause. An example of this is keeping a restaurant server from working at another restaurant – serving food requires basically the same skills and knowledge from restaurant to restaurant, with only small tweaks to the overall presentation and process.
How Workers Can Protect their Rights
In many cases, a worker can negotiate the terms of their employment contract prior to signing the document. This is especially true of clauses that do not go into effect until after they leave the company. Any worker who feels their noncompete clause is not fair should speak up and work to change it to more reasonable terms.
Chester County Employment Lawyers at The Gold Law Firm P.C. Advise Employees About Noncompete Clauses
Do not sign an employment contract with a noncompete clause until you have gone over it with an experienced employment lawyer. To discuss your legal rights and options with an experienced Chester County employment lawyer at The Gold Law Firm P.C., complete our online contact form or call 215-569-1999 today to schedule a free consultation. Our office is conveniently located in Center City Philadelphia, serving clients from Pennsylvania, New Jersey and New York.
