Non-Competition Agreements & Trade Secrets
Employers routinely require employees to sign non-compete agreements to obtain employment. Employees understandably sign these without discussing them with an attorney since they often have no choice; either sign the agreement or look for another job. Employers often take advantage of this unfair power dynamic to require onerous restrictions of their employees after the job ends. Non-compete agreements are enforceable even where the employee is laid off or fired. A non-compete hurts people badly when they are out of work and need to find a way to continue their career and provide for their family. These agreements also hurt your chances of receiving fair compensation for your work since your employer knows you can’t just jump ship and work for the competition.
Courts understand that harm and have strict requirements for these types of agreements before they will enforce them. Non-compete agreements must be reasonable in terms of the duties and jobs prohibited, in the geographic area covered by them, and in the amount of time the employee must abide by them after their former job ends. In other states, courts routinely amend non-competes to make them more reasonable. But in both North and South Carolina, the Court will either enforce the agreement as written or not at all. This is good news for employees. These high stakes give your employer a reason to negotiate with you when you’re trying to get your career back on track at another job.
Many non-competes prohibit employees from performing any job whatsoever for a competitor. These agreements are very likely to be unenforceable. There is no valid reason to prohibit you from starting a new career as a janitor with your former employer’s competitor. More reasonable non-compete agreements prohibit you from doing your same job duties for a competitor. The court will not fix this issue for your employer and will tear up the agreement in its entirety if it is too broad.
Many non-competes prohibit you from working for any competitor anywhere in the country. If your last job had nothing to do with Arizona, there is no reason to prohibit you from working there now. Even if your actual next job is directly across the street from your last one, the Court will tear up your non-compete if it required too broad a geographic scope by prohibiting you from starting a new career in Arizona. Many employers get around this problem by creating a Russian nesting doll-like structure to your non-compete (i.e., you may not work anywhere on Earth, in the Western Hemisphere, in North America, in the United States, East of the Mississippi, in North Carolina, in Mecklenburg County, in Charlotte). Courts usually cross out the terms that are too broad, but leave the terms that are reasonable in these types of agreements.
Courts will enforce very long non-competes. While agreements of one year are the most common, some employers will saddle their employees with non-competes lasting up to five years. Courts will enforce agreements lasting a very long time if the other terms are extremely reasonable, but generally, a period of more than two years is going to be looked at extremely skeptically by the Court. Non-competes lasting two years or less are likely enforceable unless their other terms are also extremely broad.
Agreements prohibiting you from contacting your former company’s customers and prospective customers are also closely scrutinized by the courts. These types of agreements should generally be limited to customers that you actually had contact with at your previous job. Many agreements will prohibit employees from contacting any customers whatsoever of their former employer. These types of agreements are often over broad and unenforceable.
Non-compete and non-solicitation agreements are extremely fact-dependent and you should reach out for an individual consultation if you are deciding whether to sign a new agreement or whether to violate the terms of a non-compete agreement you already signed.
Many employers try to call everything a trade secret in order to unfairly prevent you from working elsewhere. However, the law has very strict definitions on what actually qualifies as a trade secret. North Carolina law defines a “trade secret” as business or technical information, including but not limited to a formula, pattern, program, device, compilation of information, method, technique, or process that:
- Derives independent actual or potential commercial value from not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure or use; and
- Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Recent federal law provides a similar definition. Under federal law, the term “trade secret” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—
- the owner thereof has taken reasonable measures to keep such information secret; and
- the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information
The consequences of misappropriating actual trade secrets can be quite high (including criminal liability). Therefore, you should reach out for an individual consultation if you are deciding whether to disclose or use information from your former employer.
Employers are extremely aggressive where non-competes, non-solicitation agreements, or trade secrets are at issue. Herrmann and Murphy’s attorneys are experienced in both defusing these situations before litigation becomes inevitable and in defending individuals accused of wrongdoing. You should reach out for a consultation immediately if your former employer sends you a letter claiming you are in violation of one of these agreements or trade secrets law
Reach out for a consultation today.