Driving into the office this morning I got a call from a franchisee in North Carolina. He was looking to hire an associate, who signed a non-compete with another competitor. Someone told the franchisee that non-competes can only be enforceable for one year. The myths about non-compete, far exceed the truths. The enforceability of non-competes are governed by state law.

How long a non-compete is enforcable dependents on 2 things: what the contract says and what is enforceable under state law. The shorter of the two is the enforceability period of the non-compete.

For example in California non-competes are not enforceable and in Ohio they are enforceable for 2 years. So let say you have a non-compete for 3 years. Well, in California it would be not be enforceable at all. In Ohio it would be enforceable for 2 years. Let’s take a 1 year non-compete. In California it still would not be enforceable, but in Ohio it would be enforceable for 1 year (even though the law allows for 2 years).

In addition to confining non-competes to a reasonable duration of time, courts will also limit non-competes to a reasonable geographic area and require a litgitamate business interests for enforceablity. Using the example of the North Carolina business. It could not prevent an associate from getting a job in Ohio, unless the North Carolina business had sufficient business business activity here in Ohio. Likewise, if the North Carolina busienss sold print cartiages to commerical businesses, the North Carolina business could not prohibit the associate from selling pool supplies to residential customer two block away in North Carolina.

 

Non-compete: How long is it good for?

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