Courts across the country have been siding with employees lately when it comes to non-compete clauses, and New York is no exception. In 2016, the New York State Attorney General said, “Unless an individual has highly unique skills or access to trade secrets, non-compete clauses have no place in a worker’s employment contract.”
Defending non-compete agreements can be expensive for employers, and can lead to unfavorable results. On the other hand, companies sometimes find even unenforceable non-compete agreements to be effective at preventing workers from joining a competitor, since an employee and his or her prospective employer may be reluctant to enter into a legal battle with the worker’s former employer.
To be enforceable, a non-compete agreement must have three primary components:
- The employee must receive something of value, which is generally the job itself.
- It must protect legitimate interests of the employer, such as trade secrets.
- It must be reasonable in scope, geography and time.
When an employee challenges the enforceability of a non-compete agreement, courts often side with employees unless the company can show that the employee possessed a unique skill or acquired trade secrets that he or she will use with a competitor to the detriment of the company. Even then, courts often restrict the non-compete agreement to a narrow geographic area and a limited amount of time.
This logic follows public policy concerns on the subject, as it can be crippling to a person’s livelihood if he or she is forced out of the job market for several years because of a non-compete agreement which may or may not have any impact on the business.
However, while most states are making it more difficult to enforce non-compete agreements, Idaho is moving in the opposite direction.
An underrated technology hub, the state is trying to attract more start-ups and large technology companies. Given the hyper-competitive nature of the industry, more relaxed non-compete laws are an enticing draw for employers concerned about losing talented employees.
The state’s approach to the topic provides an interesting look into an issue that has a huge impact on both employers and employees.