What You Need To Know About A Non-compete Contract

By Author: Cameron Wieght
Total Articles: 107
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Is it possible for employers to make it so that their non-compete contract agreements with their employees become applicable throughout the United States? Or the better question is, should they even try to do so? Legal experts say that the answer is a ‘no’ for both questions.

You see, non-compete agreements between employers and employees are governed by the state laws where the said contracts were established. Now state laws across the continental United States vary widely. In Florida, for example, a non-compete contract with broad stipulations may be enforceable if the restricting provisions are deemed reasonable or have been justified to have legitimate business interests in mind. In California, on the other hand, generally looks at such agreements as unenforceable, with the exception of agreements pursuant to partnership dissolution, shareholder’s stock, or business sale.

In other states, however, non-compete contracts are deemed unenforceable if these do more than prohibit employees from making business deals with clients of their former employers. Then there’s Wisconsin, whose laws on the matter restrict ...
... their courts from doing “blue pencil” non-compete contracts in order to reform unreasonable or overly broad provisions; should a provision be unenforceable, the entire contract is considered invalid. In contrast to that, other states authorize their courts to perform “blue pencil” non-competes to reform provisions that were otherwise unenforceable.

The point is, state laws on the matter of non-competes vary, and they can vary widely. What some employers do though is to get their employees consent to be bound to laws of a particular state (like Florida) that supports non-compete agreements. Yes, this is possible, although this doesn’t mean that the “choice of law” stipulation agreed upon by the employee will hold up when in court. So if, say, an employer decides to sue one of its employees while he/she is in the state where he/she resides and the local laws on non-competes are restrictive, the courts can refuse the application of Florida law. On what grounds? Well, the action might violate public policy.

The bottom line of all these is: a non-compete contract that’s “one size fits all” is unlikely to meet the various needs of an employer, similar to how a “one size fits all” shoe may not fit your foot at all. Simply put, there are just too many differences and variables between state laws across the US when it comes to non-compete agreements. To ensure you are properly protected, it would be wiser to opt for custom agreements that have been designed according to your specific needs that take into consideration the laws of each state. Although the drafting of such contracts may prove to be more than you anticipate, it can help save an employer money, time, and a lot of headaches in the future.