Non-Compete Clauses and Their Enforceability

What are Non-Compete Clauses?

You might have had to sign a non-compete clause (NCC), sometimes called a covenant not to compete, at your current or previous job. This clause, which continually generates controversy, bars employees from either starting a similar business or becoming employed in a similar profession during a specified period of time after their current employment ends. Many NCCs also specify geographic restrictions on where this future employment or business can occur.

The purpose of these provisions is to protect the commercial interests of employers by limiting potential competition. Businesses often use these during times in which they have leverage over employees, such as when there is a greater supply of workers than demand (high unemployment). 

COVID-19: Are Non-Compete Clauses Still Valid?

The severe economic downturn affecting businesses nationwide poses an interesting question about NCCs. Generally, these provisions in employment contracts are required to be “reasonable” and support a legitimate business interest in order to be enforceable in court. 

When an employer goes to court over the breach of an NCC, it is generally up to the courts to make a decision as to whether the specific non-compete clause should be enforced based on the subjective test of “reasonableness.” It is very possible that courts will be more likely to see these clauses as unreasonable due to the effects of the coronavirus pandemic. However, some states will see more of a shift than others.

What Does Michigan Law Say About NCCs?

As recently as 2019, there was a bill working its way through the Michigan legislature that would effectively do away with NCCs in the state. However, the bill did not pass, and Michigan courts continue to enforce non-compete clauses. When courts are deciding whether a particular NCC is valid, they typically look to the “reasonableness” of the contract. This takes into consideration whether or not the employer is suppressing legitimate competition (not allowed) and the extent of the restrictions of the worker. 

What Does Illinois Law Say About NCCs?

While Illinois law does allow NCCs, courts also look to the reasonableness of non-compete provisions to determine whether or not it is valid. Additionally, state courts also consider whether or not a specific NCC injures the public interest. NCCs may not be applied to contracts of workers who make less than $13 per hour in Illinois. 

What Might Happen If You Violate an Applicable NCC?

If you have signed a non-compete clause and take actions to violate its terms, then your former employer might file a lawsuit to enforce the contract. Before taking that step, they might send you a letter that threatens legal action if you do not cease the violation. 

Should You Sign a Non-Compete Clause?

Unfortunately, unless your state’s laws recognize NCCs as unlawful, your employer is well within its rights to insist that you sign one as a condition of your employment. Depending on the amount of leverage you have, you might be able to shift the terms in your favor. But even if you do sign it, this does not automatically mean that the terms are enforceable, as discussed above.

Even if you have signed an NCC, you can always present the employment contract to a knowledgeable attorney, like Attorney Carla D. Aikens. She will be able to advise you on the best path forward, which could mean negotiating its terms or defending you in civil court. Contact the firm today for a free consultation.