What Invalidates Non-compete Agreements?
Non-compete agreements are documents which state that a person or organization will not compete for another firm's business. Some businesses which commonly use these agreements are information technology firms and media firms since they are concerned with an employee going to work for a competitor and giving away trade secrets. A business which the owner sells to another firm may also use a non-compete agreement since otherwise the owner could start up a new firm in the same industry and compete for the previous firm's clients, making the acquisition less valuable. A court can invalidate a non-compete agreement under certain conditions.
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Right to Work
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Courts check non-compete agreements to make sure that a person retains the right to practice a previous trade. If a company requires employees to sign non-compete agreements, this may prevent employees from working in a field for a certain amount of time. According to the state of Connecticut, courts examine non-compete agreements to ensure that there are no unreasonable restraints on an employee's opportunity to work in an occupation in the future.
Ambiguity
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An ambiguous non-compete agreement may not be enforceable. The state of Virginia defines an ambiguous agreement as one which can either be viewed in more than one way or refers to more than one thing at the same time. A disagreement on what a written contract states between the signers of the contract does not prove ambiguity; the decision that a contract is ambiguous is a question of law which a court decides. A non-compete contract which states that a company which sells a radio station may not create a new radio station in the same location with a similar format may be considered vague by a court since the term "similar format" is not very specific.
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Terms
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Courts may invalidate non-compete agreements if the employer does not have a legitimate reason to require them. According to the state of Oregon, this limitation includes the specific terms of the agreement, such as a geographic restriction that prevents an employee from working in a certain location and the time period before the employee can work for a competitor. An employer must be able to provide a valid reason for including terms in the non-compete agreement.
State Law
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A state may invalidate all or most non-compete agreements. According to the Employment Development Department of California, all contracts which prevent a person from practicing a trade, business or profession are automatically invalid. California allows an exception to this rule: an employer can use a non-compete agreement to prevent a previous employee from using trade secrets of the company, such as a list of customers who purchased products from the company.
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References
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