Understanding Non-Compete and Non-Solicit Provisions of Employment Agreements

Many modern employment agreements contain non-compete and/or non-solicit provisions. While the law on these types of restrictions, known as restrictive covenants, is too sordid to dive into any detail in this brief article, it is important to understand what the two types of restrictions are and how they differ.

A traditional non-compete provision in an employment agreement generally prohibits an employee from working in a similar industry or occupation after his employment agreement has come to an end, usually either via resignation or termination. Examples of non-compete provisions might be ones that prohibit one from working as an account executive in a certain type of job or working for a company that is a direct competitor of the company one is leaving. While it can be frustrating to realize you are restricted from performing certain types of work or working for certain companies, in order for non-compete provisions to be enforceable they cannot be overbroad in time or space. In other words, a non-compete cannot prevent you from working in your chosen occupation for an unlimited amount of time and in an infinite geographical space. Instead, the restriction must be reasonable and intended to protect the employer’s interests. As one can imagine, this is a largely litigated field with complicated “rules” for what is, and is not, overly broad in time or space. If you have a non-compete in your employment agreement, you should have an attorney review it before you leave your job.

By comparison, a non-solicit provision of an employment agreement generally prohibits a former employee from soliciting one of two groups of people: employees of the company or customers of the company. Basically, this type of restriction prohibits a former employee from trying to poach his former employer’s employees or customers. This type of restriction does not limit where a person can work, but instead limits the types of people (or companies) the former employee can contact. As opposed to non-compete provisions, non-solicit provisions are not as limited in time or distance due to the law’s recognition that a company does have a vested interest in maintaining its employees or customers. While this recognition is not absolute, it is far more lenient than what one might encounter with a non-compete provision. Again, if you know you have this type of restrictive covenant in your employment agreement, you will want to get legal advice before you are separated from your employment.

Often these two restrictive covenants are found in the same employment agreement as the employer seeks to completely protect its interests. In those cases, one can find that their ability to gain new employment, or perhaps be successful in it, is impaired. In those cases, it is important to have legal counsel advise you as to what is, and is not, permissible under the employment agreement so you can get on with your new job and be successful at it. Few, if any, non-compete or non-solicit provisions are absolute. Understanding what you can and cannot do can best prepare you to be successful in a new job.

If you have any questions about employment agreements or restrictive covenants, please feel free to contact me at (847) 705-7555 or lziebell@lavellelaw.com.