How to Find Loopholes in a Non-Compete Contract
Voiding a non-compete contract is possible in certain circumstances such as proving you never signed it or the contract is against the public interest.5 min read
2. How long are non compete valid for?
3. Employer’s business interests
4. Can non-competes be enforced?
5. Do Non-Compete Hold Up in Court?
6. Defeating a Non-Compete Contract: Loopholes
7. What Voids a Non-Compete Agreement?
8. Negotiating a Non-Compete Agreement
9. What happens if you break Non-Compete Agreements?
10. What state does not allow non-compete agreements?
Updated July 1, 2021:
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.
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.
For a non-compete agreement to be legally enforceable, it must meet several qualifications:
- The agreement must protect a legitimate business interest.
- The scope and length of the agreement should be reasonable.
- The agreement must be in line with the public interest.
If the agreement has no consideration, then it is seen as unenforceable.
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.
Defeating a Non-Compete Contract: Loopholes
- 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.
- 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.
- 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.
- 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 Agreements?
- 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.
- If you violate a non-compete agreement that is legally for legitimate business interests and enforceable under state law, you may have to pay money to your former employer. Furthermore, your former company may take legal action against your present employer.
- An employer that fails to enforce a non-compete agreement will be liable for the prevailing employee's attorney fees and costs, as well as money damages for tortious interference with an employment relationship if the employee costs the business money.
This area is where a lawyer will be necessary for more information and contact an employment attorney for advice. You may lose money along with the job you currently have.
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.