Non-Compete Clauses Explained in Plain English
What Is a Non-Compete Clause?
A non-compete clause is a contract provision that restricts you from working for a competitor or starting a competing business for a specified period after leaving your current employer. These clauses are most common in employment agreements but also appear in business sale agreements and partnership contracts.
Key Elements of a Non-Compete
Most non-compete clauses define three boundaries:
- Duration: How long the restriction lasts after you leave (commonly 6 months to 2 years)
- Geographic scope: The area where you cannot compete (a city, state, region, or nationwide)
- Activity scope: What activities or roles are restricted (working for specific competitors, soliciting clients, or engaging in a competing business)
Why Employers Use Them
Employers typically justify non-competes to protect:
- Trade secrets and proprietary information
- Customer relationships built during your employment
- Investments in specialized training they provided
- Goodwill associated with their business
What This Means for You
Signing a non-compete can significantly affect your career mobility. Before signing, consider:
- Could this prevent you from working in your field if you leave?
- Is the geographic scope realistic or does it cover areas where you might want to work?
- Is the duration proportionate to the employer's legitimate interest?
- What did you receive in exchange for agreeing to the restriction?
Enforceability Varies by State
Non-compete enforceability depends heavily on state law. California, Minnesota, North Dakota, and Oklahoma generally prohibit them. Other states like Florida and Texas tend to enforce them if they are reasonable. Many states have recently passed legislation restricting non-competes for lower-wage workers.
When to Consult a Lawyer
Consider consulting an employment attorney before signing a non-compete, particularly if you work in a competitive industry, the restriction covers a wide geographic area, or the duration exceeds one year. An attorney can explain how your state's laws apply to your specific agreement.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.