A noncompete agreement is a covenant that restricts an employee from working for an employer’s competitors after employment is terminated for a limited time period and within a specific geographic area. This limited time period can range from months to years, depending on the circumstances and the nature of the industry and employment. The limited geographic area may vary as well; from blocks to cities, to even larger geographic areas. Noncompete agreements typically include non-disclosure and non-solicitation agreements.
Noncompete agreements protect against unfair competition. Enforcement of these restrictive covenant depends on whether:
- The agreement protects legitimate business interests;
- Whether there is sufficient consideration for the agreement;
- The restrictions are reasonable in terms of time and geography;
- The agreement imposes unreasonable burdens;
- If there is a special relationship or transaction tied to the agreement; and
- It enforcing the agreement would result in bad public policy or harm to the public
Courts have held that legitimate business interests exist when trade secrets and special customer relationships exist. If an employee, however, can show that there is little or no consistent business with the same clients, courts will likely find there is no actual protectable interest. Courts have also differentiated between trade secrets and other confidential information that fail to rise to the level of protection of a noncompete agreement.
Noncompete agreements also require consideration. Because South Carolina is an employment at-will state, courts have held that continued employment acts as sufficient consideration. Moreover, if hiring is conditioned on signing the noncompete agreement, consideration will be found to be sufficient.