Noncompete Agreements: As noncompete and nondisclosure agreements become commonplace, we're often asked whether or not they're truly binding. The person asking is invariably someone who has found what he believes to be a better job with a competing company, and usually one which is geographically close to his present employer. What's funny about this is that most asking the question will have to sign another noncompete or nondisclosure agreement with the new employer.
The advice that I will give to anyone who is reading this is, do not sign any contract that you are not or may not be willing to abide in. Yes, in most states' courts, these agreements have been binding and enforceable, the decisions having little to do with the wails of "right to work." These aren't called restrictive covenants for nothing.
On the other hand, and muddying the issue, there are cases such as D'Sa vs. Playhut, Inc. adjudicated in California in January 2001. Playhut had admitted that the noncompete agreement was unenforceable, but forced employees to sign. When D'Sa refused, his employment was terminated. He sued and won. The question for employees is, are you willing to test the courts?
As restrictive covenants, sometimes the restrictions are viewed by state courts as being too restrictive. A computer hardware manufacturer ("assembly plant") should not have a noncompete that doesn't allow the individual to work anywhere else in the U.S. Usually, 50 - 75 miles is about max for geographical restrictions. Further, many companies have all employees sign such agreements, and many courts have found that the position held by the person signing the agreement is not commensurate with the risk of a trade secrets violation.
Nondisclosure agreements are given wider latitude by the courts, but that is to be expected. Further, many more employees have or may have knowledge of a companies practices which could injure the company that there are employees who would go into direct competition with the current employer. In some instances of a combined nondisclosure and noncompete agreement, the noncompete has been thrown out, but the nondisclosure portion has been upheld.
In one sentence, yes noncompete and nondisclosure agreements are the binds that tie. The recourse for an individual faced with this situation is to explain to the company making the offer is to tell them that s/he is under a restrictive covenant. The new company may be willing to come to some sort of agreement with the employees current employer, in a sense, buying out the contract. If the individual does not make it known to the new company that s/he is under such a covenant, what would this company think of the employee (who then signs a new agreement with the new company) when they find out that s/he already has contractual obligations. So, for the employee, honesty is the best policy. For the potential employer, the caveat is: Always ask new employees if they are under a noncompete or nondisclosure agreement.
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Changes have been made in three states where noncompetes are either illegal or weakened considerably.