Non -Competition Agreements

Non-Competition Agreements:  A Balancing Act for Employers.

Published by Brian E. Moore

A successful business is in large part built upon relationships.  Relationships with customers, vendors and employees.  It takes years to cultivate these connections, however they can be put in jeopardy overnight when an employee critical to operations leaves and begins competing with his former employer.  If the employer has an enforceable non-competition agreement or non-solicitation agreement, it has some options.   The key word being “enforceable”.

In creating a non-competition agreement, the employer needs to strike a balance between overreaching, and therefore rendering the agreement unenforceable, and protecting legitimate business interests.  A recent decision from the North Carolina Business Court, Sandhills Home Care, LLC v. Companion Home Care- UniMed, Inc., 2016 NCBC 59. is illustrative of a few things to absolutely avoid in drafting these types of agreements.

1. The agreement should not attempt to prohibit an employee from soliciting prospective customers of the former employer.
2. The agreement should be limited to prohibiting solicitation of customers with whom the employee actually had contact or dealings with in conjunction with the employment. A blanket non-solicitation that prohibits the solicitation of “all or customers”, may likely be unenforceable.
3. The agreement should not simply prohibit the employee from working in the applicable industry or working for a competitor. Rather, the agreement should provide that the employee cannot perform the type of duties he or she performed for the former employer for a competitor.

Broadly written and standard form non-competition agreements that speak of prohibiting “the solicitation of customers or working for a competitor” may seem perfectly appropriate to the parties at the start of employment.  However, when that relationship ends and an employee’s ability to make a living is at issue, rest assured these provisions will be hotly contested and put under a microscope.

North Carolina courts construe non-competition agreements strictly against the employer.  It is therefore critical that employers utilize the services of an attorney experienced in employment law and drafting these specific agreements and with a willingness to obtain a thorough understanding of their client’s operations.

If you have questions, need assistance in drafting a non-competition agreement or reviewing your existing agreements, please contact Brian E. Moore at (919) 821-7700 or at bmoore@hsfh.com.