Barbara Wilson said:
If i have signed a contract with a sales company and now need to change jobs and my family has ask me to go to work for them (competition) is there a no compete claw in NC? what do I need to do to get out of the contract now? I know in some states the no compete claws is not honored is NC one of them?
thanks
My response:
First, N.C. recognizes noncompetition contracts.
Second, cats have "claws" - - - a contract has a "clause".
May an employee be lawfully restricted from the ability to compete against a business upon termination of employment?
The answer to the question is "yes" -- if properly utilized.
North Carolina courts show a willingness to support the enforcement of covenants not to compete in light of the modernization of the state's economy and mobility of its work force.
A covenant not to compete is enforceable only if it is in writing and signed by the employee; a part of the employment agreement, contract or employment; reasonable as to duration, geographic limitations and scope of the business activities restricted; supported by mutual consideration between the employer and employee; and not contrary to public policy.
Since these covenants must be supported by consideration, those included in employment agreements for new employees are generally enforceable if specifically addressed in the agreement. When a new restrictive covenant is sought from current employees, special care must be taken to assure that the covenant not to compete is supported by valid and sufficient consideration. To require a current employee to enter into a noncompete agreement -- with nothing given the employee in return -- would result in an agreement not supported by new consideration. For current employees who are required to enter a noncompete agreement, consideration could be in the form of a bonus, a promotion or a raise, or time off with pay -- anything of value to the employee to which he or she would not otherwise be entitled. Permitting the employee to remain employed with the company is not sufficient consideration to make the non-compete covenant enforceable.
Non-competition covenants must be reasonable as to scope, time and territory. The restrictions must be no greater than necessary to protect the legitimate business interests of the current employer. For example, if the covenant is based on the employee's access to confidential information, but that information loses its value after a year, then a greater time restriction would not be enforceable. Likewise, when an employee has been selling only within one county, a court would not likely enforce a covenant restricting employment throughout the state.
As a general rule, North Carolina courts do not uphold restrictive covenants of a term longer than two years. However, a recent Court of Appeals case, Professional Liability Consultants, Inc. v. Todd, (1996), reviewed the following non-compete clause: "For a period of five years after employment, Employee will not contact or solicit insurance business from any person who is or was during the preceding three years a customer of Employer" and found it to be enforceable. The court said that time and territory restrictions must be evaluated together to determine reasonableness. In that case, the time -- five years -- was reasonable because the scope was limited to actual customers.
**N.C. Supreme Court Overturns Recent Case on Covenants Not to Compete**
In a one-paragraph opinion issued in December 1996, the North Carolina Supreme Court overturned the decision of the Court of Appeals in Professional Liability Consultants, Inc. v. Todd, (1996). It is the subject of discussion in legal circles whether the latest Todd decision conflicts with prior Supreme Court and appellate court decisions which earlier decisions approved covenants not to compete where territorial restrictions are defined in the terms of the customers with whom the employee has contact, not just geographic limits. Until the Supreme Court speaks further on territorial restriction in covenants, it would appear to be the safer practice to confine covenants not to compete to geographical restrictions or customer contact restrictions coupled with geographic restrictions.
Good luck to you, and see an attorney.
IAAL
