What Is a Non-Compete Agreement?
Roughly one in five American workers is subject to the terms of a non-compete agreement. Many end up trying to get out of their business obligations under the agreement because they are so restrictive. Courts will sometimes decline to enforce the terms of the agreement and rule in favor of the employee. However, an employee always takes a chance of personal liability when they violate the terms of a non-compete.
Roughly one in five American workers is subject to the terms of a non-compete agreement. Many end up trying to get out of their business obligations under the agreement because they are so restrictive. Courts will sometimes decline to enforce the terms of the agreement and rule in favor of the employee. However, an employee always takes a chance of personal liability when they violate the terms of a non-compete.
When Non-Compete Agreements Are Used?
Where non-compete agreements may seem unfair is that they try to control what the employee does when their time with the employer is complete. An employer may try to impose severe limitations and restrictions, perhaps even keeping the employee from being able to work in that field ever again. In addition, non-compete agreements are often written to be as broad as possible, and they can reach much further than the original intent.
Non-compete agreements may be used in several primary situations:
- When an employee is taking a job, as a condition of employment, their employer will impose limitations on what the worker may do in the future.
- When consultants or outside vendors do business with a company, they may be restricted from competing with them, especially since they have knowledge of the industry that they could have gained from the company.
- In a post-hiring agreement, such as when an employee is being given severance, the employer may try to control what the employee may do as a condition of receiving a severance payment.
- When companies agree to a deal where there is a merger or the sale of a unit, the seller may be restricted from going back into competition with the buyer.
Courts Do Not Always Enforce Non-Compete Agreements
While a non-compete agreement could be a binding agreement in certain circumstances, there are times when a court has declined to enforce the terms of the agreement. Courts are very sensitive to individuals and their ability to earn a livelihood. They do not look kindly at it when an employer, who may have superior bargaining power, imposes limits on what an employee can do in a future job.
Maryland law prohibits the use of non-compete agreements for employees earning below a certain amount. However, employees above that income threshold may still be subject to the agreements. Generally, a Maryland court would look to balance the employer’s and employee’s interests and decide whether to enforce an existing non-compete agreement.
For example, if an employee may be unable to work again in their chosen field as a result of a non-compete agreement, the court may advocate for the worker’s interests. How the court balances those factors depends on the facts and circumstances of each individual situation.
Businesses need to be careful about how they use non-compete agreements. There have even been instances in which a business has been punished for illegal conduct when they have signed a non-compete that is too broad.
There Are New Rules About Non-Competes on the Horizon
Recently, the federal government has taken steps to make rules prohibiting the use of non-compete clauses and employment agreements. There has been a concern that these agreements have been overused to restrain employees and keep them from earning a living. The Federal Trade Commission has recently proposed rules that may take effect after a period of notice and comment.
Contact the Annapolis Business Lawyers at Oliveri & Larsen Today to Help Protect Your Rights
The Annapolis business lawyers at Oliveri & Larsen can help you navigate your legal rights if you are considering signing a non-compete agreement or have already signed one. You can schedule a consultation with one of our attorneys by calling us today at 410-295-3000 or by contacting us online. Our office is in Annapolis, Maryland, and we serve clients in Ocean City, Anne Arundel County, Baltimore County, Baltimore City, Calvert County, Harford County, Howard County, Queen Anne’s County, St. Mary’s County, Worcester County, Kent County, and the upper and lower Eastern Shores of Maryland.