“I don’t need to worry about my non-compete agreement because courts in North Carolina won’t enforce them.” This is a statement that I have heard over and over from employees in North Carolina. The statement is dead wrong. North Carolina courts enforce employee non-compete agreements (technically called “covenant not to compete”) on a regular basis. For that reason, employees must guard against the danger of signing such an agreement. If you sign a non-compete agreement, you restrict your ability to get a job once you leave employment.
So, do courts in North Carolina automatically enforce these agreements? No. However, as long as the agreement meets certain basic requirements, it is likely that a court will enforce it.
Courts look at four non-compete issues:
- The non-compete agreement as a contract, must meet the elements of a contract. Two issues arise commonly when looking at a non-compete as a contract. First, the agreement must be in writing signed by the employee. Second, the agreement must be supported by “consideration” i.e. something of legal value provided to induce the employee to sign. Usually this is some form of special monetary payment, the offer of initial employment, a raise, a promotion or similar employment benefit.
- The agreement must be reasonable in temporal scope. The term temporal scope refers to how long the agreement is enforceable after employment ends. In general, courts find a temporal scope of two years (24 months) or less to be facially reasonable.
- The agreement must be reasonable in geographic scope. The term geographic scope refers in general to “area” that is covered by the agreement.
- The scope of the employment restrictions. Non-compete agreements often limit an employees ability to go to work for a competitor, or keep the employee from doing business with clients or customers that the employee worked with while employed, or will restrict the nature of the job the former employee can perform for a future employer. Courts refuse to enforce overly broad restrictions since those do not protect a legitimate interest.
Bottom line, courts enforce non-compete agreements that meet the appropriate legal requirements. You ensure you are not bound by such an agreement only if you never sign one in the first place.