Many employers have their workers sign covenants not to compete — also known as “noncompete” or “noncompetition” agreements — in which employees agree that after they leave, they can’t work for a competitor for a certain amount of time afterward. Workers also usually agree never to disclose the employer’s proprietary information or trade secrets, and in many cases such agreements bar employees from recruiting the company’s workers.
However, some states, like California, do not recognize noncompetes. Other states won’t enforce them if they’re seen as too broad — in other words, they’re not limited enough in length of time or geographic scope and they make it unreasonably difficult for a worker to find other employment.
This happened recently in North Carolina, where a nationwide solar company made salespeople sign noncompetes that barred them even from purchasing solar/roofing products from a particular local competitor and from soliciting employees who they never interacted with and who did not work at the company at the same time as they did.
The company, Power Home Solar, tried to enforce the agreement against two former employees who did go to work for the competitor, Sigora Solar. But a Superior Court judge ruled that the noncompetes, which also prohibited the workers from working for a competitor within a 100-mile radius of any Power Home location, were was overly broad in terms of both what they barred and in geographic scope.
The court also refused to accept a provision in the agreement that called for it to be interpreted under employer-friendly Michigan law, pointing out that none of the parties had any relationship with Michigan.
Cases like this illustrate courts’ increasing skepticism over noncompetes and serve as a warning to have a local lawyer review and update any noncompete agreements to make sure they’re enforceable.