In a blog post last week, we talked with our readers about non-compete clauses and the legal issues they could create for businesses who try to enforce them in states, such as California, where such covenants are considered void. We brought up the topic because of the national sandwich chain Jimmy John's, which has fallen under scrutiny for its use of such restrictive employment clauses.
While not always, non-compete agreements, sometimes called "covenants not to compete," often appear in the employment agreement context. They are typically intended to prevent an employee from accepting later employment with a competitor of the employer within a certain geographical area and for a certain amount of time. Unfortunately, while employers like these provisions, they often lead to employment litigation. In interpreting these agreements, courts in most jurisdictions try to strike a reasonable balance in which the employer is allowed to place some restrictions on the subsequent employment of its employee, so long as the restriction is not unreasonable in time and geographical scope, does not create an undue hardship, and is aimed at protecting a legitimate interest of the employer. Not surprisingly, California courts strike a "balance" that is heavily tilted in favor of the employee.