A non-compete agreement (NCAs) is a tool favoring an employer seeking to protect not only company secrets and confidential customer information, but also to prevent a disgruntled employee from joining a local competitor or starting their own rival business within a proscribed geographic area. While some states have enacted statutes specifically permitting or banning them, other jurisdictions are silent on the matter. For example, recent legislative changes in Massachusetts prevents NCAs from lasting longer than sixth months nor can they apply to hourly workers. These compromises directly contradict the attitude of the state’s governor, who had basically opposed the use of NCAs in any arena.
California is one state that specifically prohibits the enforcement of an NCA, while New York and Virginia are among states that permit them. One consistency about NCAs is they allow employers to “protect their investment in confidential information and customer relationships,” says Bill Nolan, managing partner of Barnes & Thornburg in Columbus. No matter what, NCAs definitely favor employers, he says.
More litigation?
While both Nolan and Wesley Newhouse, a partner in the Columbus law firm of Newhouse, Prophater, Letcher & Moots, LLC have litigated the enforcement of NCAs for clients, they disagree about whether there is more litigation stemming from non-competes today. Newhouse attributes what he perceives as an uptick in NCA litigation to several factors. They include:
- As technology increasingly invades the global economy, it’s easier for employees to take sensitive company information with them upon departure for jobs with competitors, or even if they start their own companies;
- As the economy declined over the past few years, have become increasingly willing to fight for customers and clients whom they served at their former employer; and
- The sheer increase in the use of NCAs has translated into an uptick in lawsuits enforcing them.
What to include
Nolan says when writing an NCA, it is important that certain considerations are included in the document so there is no confusion about the behavior it prohibits. For example, Nolan’s NCAs include:
- Definitions of the restricted behaviors that constitute NCA, according to the employer;
- Language tailored to his client’s specific industry, versus the generic language of an online form; and
- A stated and strong choice of law and venue.
Do NCAs stunt creativity?
Because the presence of an NCA might discourage an employee from leaving their job to join a new firm or even start their own company, the creativity intrinsic to new efforts can be stunted.
Through his work representing employers seeking to enforce NCAs, Newhouse has noticed employees don’t necessarily realize the gravity of the document they have signed preventing them from competing with their employer once they leave their job.
“Often, an employee signs an NCA without thinking about its ramifications until they leave their job. The NCA does not impact the employee as they are working but the impact comes when they leave. At that point, creativity and entrepreneurship are impacted, or they have to move or steer away from customers they have dealt with, making it difficult for the employee to start their own similar business,” says Newhouse.
The life of an NCA
The length of time an NCA prevents a former employee from competing with their recent employer is governed by statute, meaning it differs state-by-state. According to Nolan, it also varies by industry.
However, it seems the usual length of time an NCA is enforceable is one year. “Longer than that will be more difficult” to enforce, says Nolan.
Tami Kamin Meyer is an Ohio attorney and writer. She may be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..
