Many North Carolina business owners require workers to sign a noncompete agreement as a condition for employment, so you are not alone if you use such a strategy to protect your company’s interests. Statistics from the US Department of the Treasury indicate that around 20 percent of the US workforce, or 30 million American workers, are covered by these clauses. Still, while a carefully constructed document can prevent former employees from competing with your business, there is an entirely separate set of legal issues involved with a breach. State law generally disfavors noncompete agreements because they put a considerable burden on employees when finding other work.
As such, you might wonder about the implications and risks if you attempt to pursue a worker who breaches a covenant not to compete. A North Carolina litigation lawyer can explain the details, but some information on enforcement of noncompetition clauses and other legal options may be helpful.
Factors When Litigating to Enforce a Restrictive Covenant: As mentioned, North Carolina courts view noncompetition agreements negatively because they can hinder a worker’s future employability, thereby restraining trade. A judge may refuse to enforce a covenant not to compete, thwarting your intentions and risking the business interests you were striving to protect. Restrictions on competition may only hold up in court if they meet the following requirements:
- By statute, the contract not to compete must be in writing and clearly stated in the contract for employment.
- There must be adequate consideration to support the obligations of the parties, meaning the employee must receive something of value for signing a noncompete. Examples of consideration might be getting hired, receiving a promotion, obtaining benefits, or taking severance pay when leaving the company.
- The restrictive covenant must be focused on protecting a legitimate business interest, as opposed to some form of punishment or stifling competition. Customer lists, trade secrets, intellectual property, and other confidential information would qualify as legitimate business interests, but only if you make an effort to safeguard these assets.
- The noncompete language must be reasonable with respect to the duration of the employee’s obligations and territory it covers. There are no exact numbers on this factor, but you can guess that an agreement that geographically extends outside of North Carolina and lasts for several years will NOT be enforced.
Other Options for Protecting Your Business Interests: The above information may seem grim if you were hoping the path would be clear to pursue a breaching employee. However, there may be other legal alternatives. You may opt to file an action for misappropriation of trade secrets under North Carolina law, if the ex-employee is using confidential information in his or her efforts to compete. You may request an injunction to prevent use of trade secrets, effectively preventing that person from competing.
In addition, note that North Carolina courts follow the “strict blue pencil” rule in cases involving restrictive covenants. Judges can strike through unenforceable language in such a way as to not violate the law, so certain provisions may remain legally binding against your former employee. Unfortunately, however, courts cannot rewrite noncompete language to make the agreement enforceable.