When you took the job at the accounting firm, you signed a non-compete agreement. The contract prohibited you from opening your own practice within a 200-mile radius of the firm. In addition, the agreement stipulated that you had to pay the firm $50,000 for any client that left in order to pursue accounting services with you. Now that you are ready to start your own practice, you are worried about the ramifications of the non-compete agreement.
Non-competition agreements are fairly common in certain industries. They typically become effective when an employee's relationship with the company terminates. Employers use these agreements to protect trade secrets and goodwill. However, due to the limitations that these contracts impose, courts tend to have very low opinions of them. Furthermore, courts will look very closely at these agreements when disputes involving non-compete contracts enter the courtroom.
If you are engaged in a dispute over a non-competition agreement, an attorney in the Houston area can help you protect your interests. Read further for more information about non-compete agreements.
Like all contracts, there are certain legal requirements that must exist in order for a non-compete agreement to be valid. The contract must include consideration and be reasonable when it comes to scope, geography requirements, and the length of time the contract remains active. The agreement must also function as a protection strategy to guard a justifiable business interest.
In terms of consideration, employment usually satisfies this role. However, if you signed the contract after you began your employment with the firm, then your employer should provide some other consideration that benefits you. If your employer failed to do this, then the court may rule that the contract is invalid.
The main factor that the court will consider when it is reviewing the legality of a non-compete contract is whether the agreement is reasonable. For example, if the contract includes aspects that hinder an employee from making a reasonable living, the court might rule that the contract is unreasonable. In the above example, the agreement specified that the employee could not do business within a 200-mile radius of the accounting firm. If the firm provides accounting services to individuals and businesses only within a 50-mile radius, the court may refuse to enforce the agreement.
If you are involved in a dispute over a non-compete agreement, or if your employer has asked you to sign such a contract, it is important to understand your rights. Regardless of the scope of the contract, you have the right to earn a reasonable living.