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How Valid is a Non-Compete Agreement?

Posted by Jonathan Krems | Mar 16, 2023 | 0 Comments

In today's Freedom Friday blog and email newsletter, I want to talk about something that I actually get asked to review frequently, and that's a non-compete agreement, or a covenant not to compete, within the context of a larger employment agreement.  Probably the number one question I get is how valid is a non-compete agreement, or whether this non-compete agreement can seriously be enforced.  In some instances, a non-compete agreement is very enforceable, and in some instances, it's not.  But first, let's talk about what a non-compete agreement is in the first place.

Traditionally, a non-compete agreement prohibits an employee from working for a competitor identified by name or description during a specific period of time, and within a specific geographic area.  A non-compete agreement is different from a non-solicitation agreement, which would prohibit a former employee from approaching customers, taking employees with them when or after they leave, and possibly how a former employee approaches suppliers or vendors of the former employer.  A non-compete agreement is also different from a confidentiality agreement, which requires an employee or former employee to keep proprietary information and trade secrets confidential from others.

In Oklahoma, a non-compete agreement can be enforceable, but it must be reasonable.  In addition, there are several ways a non-compete agreement can be challenged.  Here are eight (8) ways to challenge a non-compete agreement:

  1. No Violation of Terms

The first way you can challenge a non-compete agreement would be to show the new job does not violate the terms of the non-compete agreement you signed with your former employer.   If you are ever asked to sign a non-compete agreement as a condition of employment, you need to retain a copy for your own records.  You may need to request a copy, or if there is already litigation, your attorney needs to request one on your behalf.  Perhaps there is not a real issue with a new job, but this is where you would start.

  1. Shady Employer

The second way you can challenge a non-compete agreement would be if you have or had a shady employer.  If you can show your current or former employer engaged in or asked you to act illegally, or treat your customers in a dishonest or unethical manner, the employer will not want that known that it was engaging in illegal acts, or dishonest or unethical conduct towards its customers, so this issue can be a defense towards a non-compete agreement.

  1. No Legitimate Business Interest

The third way you can challenge a non-compete agreement is if there is no legitimate business interest.  A non-compete agreement is usually meant to protect company trade secrets or proprietary information.  However, if you did not have access or exposure to that sort of information in your position, then you can make the case the non-compete should not be enforced because there is no legitimate business interest to protect.

  1. Unreasonable Terms

The fourth way you can challenge a non-compete agreement is if there are unreasonable terms.  Some employers ask for overly broad limitations, intentionally or not.  A smaller company might be using a contract found on the Internet which does not fit their business.  An employee who signs such an agreement can challenge it on these grounds.   For example, if a company only does business in one state, the non-compete cannot stop you from taking a similar position or working in the same industry in another state.  Also, if a company operates in a niche market, it can't block you from working in the entire industry.

  1. Employer Breach of Employment Contract

The fifth way you can challenge a non-compete agreement is if the employer breached their employment contract with you as an employee.  Most non-compete agreements are not a separate contract, but part of a larger employment agreement.  If you can show that the employer did not abide by all of the terms of your employment agreement, it is highly unlikely you can be forced to follow the non-compete agreement.

  1. Employer Trickery

The sixth way you can challenge a non-compete agreement is if the employer tricked you into signing it.  If the employer made verbal or even written promises to you for you to sign the non-compete agreement, but did not follow through with them, or if you were told the non-compete agreement would be enforced against a specific future employer, but your former employer attempts to enforce it regardless of who you work for, then these promises which were not fulfilled can be a defense to enforcing the non-compete agreement if its challenged in court.

  1. Termination Without Cause

The seventh way you can challenge a non-compete agreement is if you were terminated without cause.  If you were or are part of a mass layoff, or were terminated and did nothing wrong, any non-compete agreement might be null and void.

  1. Unsigned Agreement

The eighth way you can challenge a non-compete agreement is if you didn't sign it.  Basic contract law requires a signed writing.  If you do not recall signing the non-compete agreement, you or your attorney should ask for a copy.  Never assume your current or former employer possesses a valid contract.

Thinking about starting a small business?  Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth?  Please contact me at [email protected] to schedule a FREE strategy session.

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About the Author

Jonathan Krems

Jonathan is the Founder and Managing Attorney of Liberty Legal Solutions, LLC, a law firm dedicated to building, protecting, and defending the business and personal interests of our clients in Oklahoma.  Jonathan's primary practice areas are business law, contracts and agreements, business liti...


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