![]() at 124, 392 S.E.2d at 449.įurthermore, forcing an employee to sign a covenant not to compete under threat of being fired is not sufficient consideration. The Court of Appeals affirmed a finding that the covenants were unenforceable for lack of consideration. 488, 397 S.E.2d 239 (1990), an employee never saw an employment contract or anti-competitive agreement before being asked to sign them after three days of work. If an anti-competitive agreement is signed following employment, there must be new consideration to support the agreement, such as a change in compensation, duties or nature of the employment. In other words, if the covenant is part of the original employment offer, the job itself is valid consideration. This promise of new employment is valuable consideration that will support an otherwise valid covenant not to compete contained in the employment contract. Anti-competitive agreements are generally entered into at the time and as a part of the contract of employment. ConsiderationĪ covenant not to compete, like any other contract, must be supported by consideration to be valid. The party seeking enforcement of the anti-competitive agreement (usually the employer) does not need to have signed the writing. Like other statutes of frauds provisions, only the party against whom enforcement is sought (usually the employee) needs to have signed the document. § 75-4 provides that no contract "limiting the right of any person to do business anywhere in the state of North Carolina shall be enforceable unless such agreement is in writing duly signed by the party who agrees not to enter into any such business within such territory." WritingĬovenants not to compete must be in writing. 387, 390, 42 S.E.2d 352, 355 (1947).Ĭourts today will enforce a covenant not to compete if it meets certain requirements, including that it is It is as much a matter of public concern to see that valid engagements are observed as it is to frustrate oppressive ones." Sonotone Corp. Later decisions, however, were willing to uphold anti-competitive agreements: "While the law frowns upon unreasonable restrictions, it favors the enforcement of contracts intended to protect legitimate interests. Early decisions on anti-competitive agreements reflect the common law reluctance to enforce such covenants, noting that "ontracts restraining employment are looked upon with disfavor in modern law." Kadis v. ![]() As a result, covenants not to compete were unenforceable for several centuries.Ĭovenants not to compete are now enforceable in many states, including North Carolina. To restrain a person from practicing in his apprenticed profession could prevent the person from making a living. In those days, individuals were apprenticed to certain trades and could only work in the field of their apprenticeship. Historically, such agreements were prohibited in early common law as being against public policy. ![]() A former employee violating such a contract can be ordered by a court to pay damages as well as to stop the competing enterprise. What recourse does Ruth’s former employer have?Ĭovenants not to compete, or anti-competitive agreements, are contracts that an employee will not compete against an employer following termination of employment. Mary quits and joins a competitor 100 miles away. The terms of the agreement provide that Ruth will not be employed in a competing business within a radius of 350 miles for two years following employment. TRuth signs a covenant not to compete as part of her employment agreement.The terms provide that Mary will not compete against the company for one year within 10 miles of the home office and is based on the "valuable consideration that Employee is willing to accept continuation of employment on the terms agreed upon." Mary signs the document. Three months after joining her new firm, Mary’s employer asks her to sign a covenant not to compete.Is John’s covenant not to compete enforceable? John leaves the company several years later. When John was hired, he agreed orally not to compete against his employer for one year after he left the company.By Jim Slaughter Updated from "The Essentials of Covenants Not to Compete" in The Litigator of the N.C. ![]()
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