Frequently Asked Questions About Non-Compete Agreements
What are some examples of reasonable business interests that can be protected by a non-compete agreement?
Under case law in Iowa, a court may only enforce a non-compete agreement if the agreement’s restrictions are reasonably necessary for the protection of the employer’s business.
Examples of reasonable protections and interests that may be covered by a non-compete agreement include:
- Preventing employees from taking advantage of customer or supplier relationships that the employee cultivated during his or her employment
- Using confidential or proprietary information that the employee acquired during his or her employment
- Using special skills and training that the employer provided to the employee
An employer cannot use a non-compete agreement to prevent former employees from fairly competing against the employer.
What if my employer refuses to let me have an attorney review the non-compete agreement they have asked me to sign?
It is highly advisable that you have an attorney review any non-compete agreement that your employer presents to you. An attorney can advise you as to whether the non-compete agreement is overly-broad and can help you to ask your employer to limit the scope of the agreement down to the minimum scope necessary to protect the employer’s interests.
The scope of a non-compete agreement can include its duration, its geographic reach, and/or the types of companies or industries the employee would be prohibited from working for. Depending on the circumstances, it may be possible to negotiate severance or other payments during the period of a particularly strict non-compete agreement.
However, if your employer is demanding you sign a non-compete agreement without consulting with legal counsel of your choice, you should decline to sign the agreement as denying you the opportunity to consult an attorney interferes with your ability to make an informed decision regarding whether or not to sign the agreement.
Is a non-compete agreement enforceable if I am unable to work anywhere because of it?
If you find yourself unable to work in your chosen profession or industry due to your non-compete agreement, it is likely that the scope of the agreement is too broad. A non-compete agreement cannot be used to prevent an employee from working for any other company.
You may be able to challenge the enforceability of your non-compete agreement in court, or challenge the agreement if your employer attempts to enforce it against you for an alleged violation. If an Iowa court determines that the agreement is too broad, it may choose to reform the agreement to an enforceable scope.
Is my non-compete agreement enforceable if I signed it after starting my employment?
A non-compete agreement, like any other contract, requires “consideration”, or the exchange of a thing or promise of value, to be enforceable. If a non-compete agreement is signed upon being offered or starting employment, then the promise or offer of employment serves as the required consideration.
If you are asked to sign a non-compete agreement after you have already started working, then your “continued” employment will have to serve as consideration for your agreement. Although some states have ruled that continued employment is not valid consideration for non-compete agreements, Iowa courts have ruled that employers can rely on continued employment as valid consideration for a non-compete agreement signed in the course of employment.
Of course, if you are asked to sign a non-compete agreement conditioned on some change in your employment, such as a raise, a promotion, or a change or increase in responsibilities, that change in your employment could also constitute valid consideration for your non-compete agreement.
Is it possible to get out of a non-compete agreement?
If your non-compete agreement is a validly-executed agreement with a reasonable scope, it is not likely to get out of the agreement. It may only be possible to get out of a non-compete agreement if:
- The agreement was not validly executed — such as if you signed under coercion, duress, or without knowledge of its terms
- If the agreement is deemed to be overly-broad in scope, such as having too long a duration, covering too wide a geographic scope, or covering too wide of a business or industrial scope
If you are looking to get out of a non-compete agreement to take advantage of knowledge or skills that you acquired as a result of working for your employer, like customer or supplier contacts, specialized skills or training, or trade secrets, a court will likely rule that your employer has a legitimate interest in protecting its investments and proprietary information.
Of course, it is possible that you and your employer come to an agreement that your employer will not enforce your non-compete agreement if you choose to pursue a particular business or employment opportunity after leaving your current job.
Some employers will not enforce a non-compete against an employee who leaves to pursue an opportunity that does not jeopardize the employer’s competitive advantages.
What happens if I violate my non-compete agreement?
If you violate your non-compete agreement, your employer may choose not to enforce the agreement against you. Your employer may decide that whatever monetary damages or harm you may have caused would be outweighed by the time and expense of enforcing your non-compete agreement.
If your employer chooses to enforce your non-compete agreement, it may choose to do so against you. It may also choose to bring a legal claim against your new employer, especially if your new employer had knowledge of your non-compete agreement and that you were violating the agreement.
In addition, violation your non-compete with your old employer may also be a violation of your agreement with your new employer. Many employers require new hires to sign agreements both disclosing any restrictive covenants they have signed with former employers and and agreeing to not take any actions during their employment that would violate those restrictive covenants.
Therefore, if you violate that kind of agreement with your new employer, you could be subject to discipline or termination or even subject to legal action by your new employer for any losses it suffers due to your violation of your non-compete agreement.
Contact an Iowa Employment Lawyer for Assistance
If you’ve been asked to sign a non-compete agreement, it is a good idea to have a lawyer review it prior to signing. If you’ve already signed an agreement but feel that the terms are unfair, please don’t hesitate to reach out for help. Contact Higgins Law Firm, PLLC to schedule a confidential consultation to review your agreement and discuss your rights and legal options. We can be reached at (515) 619-9148 or through our contact forms.