All companies seek to protect their interests. This concept often extends to the world of human resources and may manifest itself in the form of non-compete agreements. These documents restrict a company’s current and former employees from working for its competitors for a given duration of time and within a certain geographical area, Business News Daily explains. Although non-compete agreements are legal documents, their enforceability is often disputed. Navigating these types of legal issues is a key responsibility for those who work in human resources.
Enforceability of Non-Compete Agreements
The parameters of non-compete agreements can vary greatly. However, all are designed to ensure that a company’s investment of time and training in their workers doesn’t end up unprofitable. Non-compete agreements prevent workers from sharing trade secrets like software, formulas, client lists and ideas, and from the employee taking a company’s customers should he or she ever decide to start a business. For companies seeking to draft up such agreements, certain elements must be addressed.
Your Non-Compete Agreement
When drafting a non-compete agreement, HR managers should generally include some or all of the following objectives:
- A reason. The company should explain why it feels it is necessary for such an agreement to exist.
- Duration. Companies must specify how long an employee is barred from working at a competitor. Typical agreements last from six months to one year, although periods as long as two years are also common.
- Scope. The agreement must detail what kinds of work and services are restricted.
- Geography. The agreement must outline the specific physical boundaries in which an employee is barred from work. This section of the agreement should not put undue burden on the employee. Companies commonly approach this topic by outlining a one-mile radius around the office address, although larger geographical areas — including cities — are not unknown.
- Competition. Companies must define who, exactly, its competitors are. The agreement may identify certain individual companies or even entire industries.
- Compensation. Companies must define what compensation an employee will receive in return for complying with their non-compete agreement.
- Damages. Non-compete agreements outline what damages the employer should receive if the terms are violated.
Although non-compete agreements are legally binding, the enforceability of such documents is often debated, with the common argument being that such documents put unfair and undue burdens on the individuals in question. Non-compete agreements hold more weight when a company’s time and location restrictions are limited. Restrictions vary by state, and certain occupations are often exempted.
Non-Compete Agreements State by State
The chart below offers a broad overview of states that do not enforce non-compete agreements, as outlined by Legal Nature. Certain exempt occupations are also included. Note that this information is generalized; to understand the exact implications of any law requires more thorough study.
|Arizona||Broadcasters, physicians (in some circumstances)|
|California||All (non-compete agreements are not enforceable under California law)|
|Connecticut||Broadcasters, security guards|
|Illinois||Broadcasters, government contractors, physicians|
|Iowa||Franchisees that do not renew|
|Kansas||Accountants (limited exemption)|
|Louisiana||Auto salesmen, real estate broker licensees (with specific requirements)|
|Maine||Broadcast industry professionals (usually)|
|Maryland||Broadcasters, physicians, nurses, social workers, psychologists|
|Missouri||Secretaries and clerks (limited)|
|Montana||All (non-compete clauses are not enforceable except with the sale of a business or the dissolution of a partnership)|
|New Jersey||In-house counsels and psychologists|
|North Dakota||All (non-compete and non-solicitation clauses are not likely to be enforceable in North Dakota)|
|Oklahoma||All (non-compete clauses are not allowed)|
|Oregon||All (non-compete agreements are only permitted in certain statutorily enumerated circumstances and are void unless in strict compliance with statutory requirements)|
|Tennessee||Physicians (in some circumstances)|
|Texas||Physicians (in some circumstances)|
|Vermont||Beauticians and cosmetologists (by their schools)|
|Washington||Broadcasters (in some circumstances)|
Pursue a Career in Human Services
Understanding the implications of non-compete agreements is just one of the exciting challenges individuals may find in a human resources career. At Jefferson University, the online Bachelor of Science in Human Resources Management degree prepares students to work successfully in organizations of any type. With a curriculum guided by the standards of the Society for Human Resources Management, students can earn the credentials they need for professional advancement in as little as two years.