NON-COMPETE CONTRACTS

WHAT IS A NON-COMPETE?

  • A non-compete contract is an agreements between a worker and employer that restricts the worker’s ability to change jobs. The specifics vary across employers and states, but they all restrict the ability of an employee to compete with his or her current employer for some specified period of time within a specified geographic area.
  • Non-compete agreements can promote innovation and allow for the employer to recover the costs of worker training. Non-competes paired with non-disclosure language can also protect a company’s trade secrets and other proprietary information. However, non-competes can have significant negative implications for worker bargaining power, job mobility. They can also be used to improperly restrict competition.
  • Similar to non-competes are “no-poach agreements or non-solicitation agreements. These are often used between franchisees and franchisors to restrict the ability to hire each other’s workers.  
  • While non-competes are more common in certain occupations (e.g., healthcare, management, computer and mathematical, and architectural and engineering occupations), they are also used in the labor market across educational, occupational, and income groups.
  • Non-compete restrictions are enforceable not only against workers who voluntarily quit, but also against those who are fired.

MISSISSIPPI NON-COMPETE LAW

Mississippi recognizes an employer has a legitimate interest in the protection of its customer base, its goodwill, and its ability to succeed in a competitive marketplace. Covenants may be used to protect confidential information, trade secrets, proprietary information, vendor relationships, business practices, and the employer’s investment in training and education of an employee.

However, restrictive covenants are not favored in law. The employer has the burden of proving their reasonableness; and the reasonableness as to time and space limitations must be determined from the facts of each case.

When considering whether to enforce a covenant not to compete, the court will weigh the rights of the employer, the rights of the employee, and the rights of the public. Enforcement will be predicated upon the reasonableness and specificity of its terms, primarily the duration of the restriction and its geographic scope.

BEST PRACTICES FOR EMPLOYERS

Employee departures increase your costs where replacement involves significant time and training. Departures also can impact profitability through the loss of customers and proprietary business information. Therefore, employers should carefully craft their employment agreements to protect their interests to the fullest extent the law allows.   

Many employers use non-compete contracts that contain unenforceable, overbroad provisions. If successful enforcement is your goal, then you obviously need a properly drafted agreement.

Many employers also mistakenly wait until after the employee has accepted employment before asking the employee to sign the non-compete requirement. This arguably puts the employee at an unfair disadvantage. It also leaves open the possibility that a court will find that no consideration was paid in return for the restrictions obtained. Therefore, you should disclose to potential new hires early on that a job offer will be conditioned on signing a non-compete contract.

Any attempt by the employer to have an employee sign a non-compete after hiring should be accompanied by the offer of some specific additional consideration. 

BEST PRACTICES FOR EMPLOYEES

Non-competes can have a chilling effect on employee mobility because both the employee and his potential employer may fear the potential for litigation.

An employee who is working under a non-compete agreement has less leverage when it comes to negotiating for greater compensation.

In our experience, almost everyone who is asked to sign a non-compete does so.  Few seek legal counsel or even read the terms before signing. Others are completely unaware that their employment agreement even contains a non-compete provision. Most are unaware of the resulting legal implications.

You should carefully read your employment contract and identify any restrictive provisions. If there is non-compete language, you need to understand how it effects your freedom of movement.

You should evaluate whether you are being adequately compensated for agreeing to any restrictions on movement. You should also attempt to negotiate better terms before signing. It rarely hurts to ask.   

If you have already signed a non-compete agreement that you believe is overly restrictive, you should look for opportunities when you have the leverage to renegotiate the terms, or eliminate it altogether.

CONTACT US

We welcome the opportunity to talk with you about your specific legal needs. Contact us online or call 601-957-3101.