North Carolina Law on Non-Compete Agreements: An Overview
If you’re a North Carolina employer, chances are you’ve considered using non-compete agreements (NCAs) to protect your business interests. After all, these legal contracts can prevent employees from working for your competitors or starting their own competing businesses.
However, it’s important to understand the specifics of North Carolina law when it comes to NCAs. Here’s an overview of what you need to know.
What is a Non-Compete Agreement?
A non-compete agreement is a contract between an employer and an employee that prohibits the employee from engaging in certain business activities after leaving the company. This can include working for a competitor, starting a competing business, or disclosing confidential information.
NCAs are often used to protect an employer’s trade secrets, customer relationships, and other valuable business assets. However, they can also limit an employee’s career opportunities and may be subject to legal challenge if they are deemed too restrictive or unfair.
North Carolina’s Approach to Non-Compete Agreements
North Carolina takes a relatively conservative approach to NCAs. While they are generally considered valid and enforceable, the state has several restrictions in place to protect employees’ rights.
For example, North Carolina law requires that NCAs must be in writing and signed by both parties. They must also be supported by valuable consideration (i.e. something of value that the employee receives in exchange for signing the agreement, such as a job offer or salary increase).
In addition, NCAs in North Carolina must be reasonable in scope, meaning that they cannot be overly broad or restrictive. Specifically, they must be limited in duration (usually no more than two years) and geographical scope (usually limited to the area where the employer conducts business).
North Carolina law also requires that NCAs be tailored to the specific employee and the employer’s legitimate business interests. In other words, a “one-size-fits-all” approach to NCAs is not allowed.
Finally, North Carolina courts have the authority to “blue pencil” NCAs, which means they can strike out any provisions that are deemed unreasonable or unenforceable. This can result in a less restrictive NCA that is still valid and enforceable.
Enforcing a Non-Compete Agreement in North Carolina
If an employer wants to enforce an NCA in North Carolina, they must file a lawsuit and prove that the agreement is valid, reasonable in scope, and necessary to protect the employer’s legitimate business interests.
If the court finds that the NCA is valid and enforceable, it can issue an injunction to prevent the employee from engaging in the prohibited activities. However, North Carolina law does not allow for “liquidated damages” (i.e. a pre-determined amount of damages that the employee must pay if they breach the NCA).
It’s important to note that North Carolina law also allows employees to seek attorney’s fees and costs if they successfully challenge an NCA in court. This means that employers should carefully consider the scope and validity of their NCAs before implementing them.
Conclusion
Non-compete agreements can be an effective tool for protecting an employer’s business interests, but they must be carefully crafted to comply with North Carolina law. Employers should seek legal advice to ensure that their NCAs are reasonable in scope, tailored to the specific circumstances, and supported by valuable consideration. Employees should also be aware of their rights and seek legal advice if they believe that their NCA is overly restrictive or unfair.
