Employees who have signed, or have been asked to sign, a non-compete agreement (also known as a noncompetition agreement or covenant not to compete) want to know if those agreements are enforceable. The answer in most cases is: “it depends.”
In North Carolina, a “valid noncompetition agreement entered into in the employer-employee context must be (1) in writing; (2) reasonable as to time and territory; (3) made a part of the employment contract; (4) based on valuable consideration; and (5) designed to protect a legitimate business interest of the employer.” Copypro, Inc. v. Musgrove, 754 S.E.2d 188 (N.C. App. 2014).
Cases involving non-compete agreements are often brought by employers against former employees for allegedly violating the agreement when the former employee accepts a different job or starts a new business. The second requirement of the reasonableness of the time and territory of the restriction is often a significant issue and North Carolina courts will “consider each element in tandem – the two requirements are not independent and unrelated.” Farr Associates, Inc. v. Baskin, 530 S.E.2d 878 (N.C. App. 2000). “Although either the time or the territory restriction, standing alone, may be reasonable, the combined effect of the two may be unreasonable.” Id. “A longer period of time is acceptable where the geographic restriction is relatively small, and vice versa.” Id.
Is your non-compete agreement enforceable? It depends. In North Carolina, such an agreement can be enforceable if it is in writing and complies with certain specific requirements.