1. What are Non-Compete Agreements?
2. How long are non compete valid for?
3. Employer’s business interests
4. Can non-competes be enforced?
5. Can I Work for a Competitor if I signed a Non-Compete?
6. Do Non-Compete Hold Up in Court?
7. How to Get Out of a Non-Compete Agreement: Loopholes
8. What Voids a Non-Compete Agreement?
9. Negotiating a Non-Compete Agreement
10. What happens if you break Non-Compete Agreement?
10.1. Injunctive Relief
10.2. Monetary Damages
10.3. Punitive Damages
10.4. Liquidated Damages
10.5. Court Costs and Attorney Fees
11. What State Does Not Allow Non-Compete Agreements?

Updated May 5, 2022:

It is possible to find non-compete loopholes in certain circumstances in order to void a non-compete contract. For instance, if you can prove that you never signed the contract, or if you can demonstrate that the contract is against the public interest, you may be able to void the agreement. We highly recommend you to hire a contract review attorney to help, but first, read this article to learn more about the topic.

What are Non-Compete Agreements?

  • Non compete clauses are also called a provision or restrictive covenant. The purpose of non-competes is for employment context. 
  • A non-compete contract is a legal agreement that prevents an employee from working for other competing firms after leaving the business. In some industries, it's common for employers to request that their employees sign a non-compete contract. While it's true that an employer cannot force you to sign one of these agreements, he or she may be able to fire you for not signing or may decide not to hire you if you are a new employee. 
  • Non-compete agreements do differ from state to state as some state courts can disregard the agreements altogether. Some states, on the other hand, would see this as a threat to the company's business interests. 

How long are non compete valid for?

In many businesses, a six month non-compete will be judged acceptable and therefore enforceable. The rule of thumb is that the agreement should not last longer than is reasonably required to protect the employer's legitimate business interests.

Employer’s business interests

An employer can use non-compete agreements to protect them from former employees disclosing confidential information about the company, customer relationships, and other operations. You must sign the non-compete as part of the employment agreement. Their goal is to lessen the competition in the industry. 

Can non-competes be enforced?

In most cases, courts will not uphold non-compete agreements because many are not legally enforceable. For an organization a non-compete can be a significant source of value. In a dispute involving a non-compete contract, the court will usually try to determine if the terms of the contract are reasonable. For a non-compete agreement to be legally enforceable, it must meet several qualifications:

  1. The agreement must protect a legitimate business interest.
  2. The scope and length of the agreement should be reasonable.
  3. The agreement must be in line with the public interest.

 If the agreement has no consideration, then it is seen as unenforceable.

Can I Work for a Competitor if I signed a Non-Compete?

If your employer presents you with a non-compete agreement and you decide to sign the contract, you are promising not to compete against your employer once your employment ends. In addition to preventing you from signing an employment contract with a competitor of your former employer, non-compete clauses can prevent you from:

  • Working as an independent contractor with a competitor.
  • Becoming the owner or part-owner of a competitor.
  • Investing in a competitor.

Do Non-Compete Hold Up in Court?

  • Non compete clauses are treated differently by courts in different states. Some states are keen to enforce covenant and will aggressively revise ones that are overly broad in scope or time to make them more enforceable.
  • You could also attempt to prove that the terms of the contract are too broad. For example, if the non-compete clause lasts an unreasonable amount of time or restricts you from working in an overly large geographic area, the contract might not be enforceable. If your employer only operates in a single state, for instance, it would be unreasonable to restrict you from working for a competitor that does not operate within that state. It would also be unreasonable for a non-compete agreement to prohibit you from working for a competitor years after the trade secrets your employer seeks to protect are no longer valid.

How to Get Out of a Non-Compete Agreement: Loopholes

  1. In some cases, it may be possible for you to defeat a non-compete contract. For instance, if you are able to prove that accepting your new job doesn't actually violate the terms of the agreement, you should be able to accept your new position and your former employer won't be able to stop you. Make sure to carefully read the terms of your non-compete contract so that you understand its limits. The terms of the agreement may be more flexible than you think.
  2. Another way to defeat a non-compete contract is to show that your employer has behaved illegally or unethically towards their clients. In general, an employer will not want these matters raised in a court case, so they may void your non-compete agreement if you have proof of these behaviors.
  3. Showing that the agreement is not related to a legitimate business interest is the most effective way of getting out of a non-compete contract. The goal of any non-compete agreement is to protect trade secrets. If you can show that your former role did not require you to access trade secrets, you should be able to accept employment with any company that you wish.
  4. Proving that there was a breach of your employment contract is yet another way that you can defeat a non-compete agreement. If your employer did not fulfill the employment contract terms, then they likely can't force you to stick to a non-compete agreement. For example, if your employment contract required that you receive a lump sum payment upon termination and your employer refused to pay this sum, you should be able to void the non-compete clause.

What Voids a Non-Compete Agreement?

Voiding a non-compete contract may also be possible if your employer promised you something in exchange for signing the agreement and did not intend to fulfill this promise. An example of this would be an employer stating he or she would only enforce the contract if you tried to work for a single competitor and then later preventing you from working for another competitor.

Negotiating a Non-Compete Agreement

Employees negotiating a non-compete contract with their employer should only agree to terms that are actually necessary to protect the employer's interests. The employee if you're on good terms with the employer, discusses the non-compete agreement and come to a confidentiality agreement. Upconsel can help give advice to your employee rights. It is important to get an attorney to analyze your contracts to answer questions you may have. Non-compete agreements should be reviewed by legal counsel to ensure the employee is safe.

What happens if you break Non-Compete Agreement?

Breaking non-compete agreements will cause you to be fired resulting in losing your job. Under the terms of your contract, if you had signed it, you have given the facts that you will not work for another company. The agreement is still valid even when you leave the company, however, an UpCounsel's employment attorney may help you to try to find loopholes to void a non-compete agreement.​

Injunctive Relief

  • The most frequently requested and granted relief for violating a non-compete agreement is an injunction.
  • As a result, the previous employer typically does not attempt to determine whether there are damages.
  • Alternatively, a previous employer often requests that a judge upholds a non-compete agreement and forces the worker to leave their new employer.

Monetary Damages

  • Former bosses sometimes look for damages –- typically against their former worker.
  • Compensation is a common form of damages or compensation for loss of profits as a result of the violation.
  • Cambridge Engineering, Inc. v. Mercury Partners 89 BL, Inc is a case where monetary damages were awarded.
  • For monetary damages to be granted, there must be evidence of a veritable loss. This loss can vary from small amounts to significant amounts, according to the evidence of damages presented by the employer to the judge.

Punitive Damages

Punitive damages is another common kind of damages and are awarded for vindictive behavior. Punitive damages necessitate clear proof of this intentioned, vindictive conduct. Malicious behavior is necessary in order to substantiate a claim, so if such a claim is satisfied, punitive damages will be made available.

Liquidated Damages

  • Another relief option for the breach of a non-compete clause is liquidated damages.
  • These are stated in a contract as the sum, or a formula for producing an exact sum, that one party to a contract will pay for violating that contract.
  • In the case of liquidated damages, an employer can list a sum that their worker must pay if they violate the non-compete contract with their boss.
  • As liquidated damages are a component of the contract, a new employer will not be required to pay liquidated damages, unless the employee signed an agreement with their previous employer.
  • A judge will need to decide whether a liquidated damages clause is appropriate before asking a party to pay the damages. The sum of money depends on the situation.

Court Costs and Attorney Fees

Ultimately, the unsuccessful party could be held accountable for court fees and the cost of hiring an attorney. This will be contingent on whether the victorious party requests these damages and whether the court thinks that the successful party's conduct justifies them paying for these fees. 

What State Does Not Allow Non-Compete Agreements?

While most states recognize non-compete agreements, specifically California, North Dakota, Montana, and Oklahoma prohibit employee non-compete agreements in all circumstances.

If you need help voiding a non-compete contract, you can post your legal needs on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.