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Reports show use of noncompetes is on the rise

It has long been standard course in the area of technology, sales, business and other such highly competitive markets to have prospective employees sign what are known as noncompete agreements as a condition of their employment.  

For those unfamiliar with the concept of a noncompete, it is essentially a legally binding pact in which an employee forfeits the ability to work for competitors located within a designated geographical region or in certain business areas for a set time in the event they part ways with their employer.

By way of illustration, a computer programmer may have signed a noncompete dictating that in the event they leave their position within the company, they cannot take a job as a computer programmer at any other company or firm within the same city for one year.

Interestingly, recently released reports indicate that noncompetes are now starting to be used in new — and perhaps unorthodox — fields. 

Specifically, these reports suggest that people from chefs and hairdressers to camp counselors and event planners are now being forced to sign noncompetes as a condition of their employment.

Proponents of noncompetes argue that they not only serve to protect otherwise valuable company information (trade secrets, training tools, customer lists, etc.), but also encourage employers to invest time, money and energy into their workers and stimulate the local economy.

Opponents, however, argue that noncompetes stifle ingenuity, decrease the mobility of employees and even hurt families, as people are unable to go out and earn in their chosen field for a significant amount of time.

It is worth noting that two states — California and North Dakota — essentially ban noncompetes altogether (except in extremely limited circumstances), while Massachusetts is considering enacting similar legislation.

However, in the majority of the states — including here in Minnesota — courts will step in if the terms of the noncompete are particularly egregious.

“In most states there has to be a legitimate business interest, and it has to be narrowly tailored and reasonable in scope and duration,” explained one law professor.

It will be very interesting to see if this trend of noncompetes in the service industries continues. In the meantime, those employees with questions about noncompetes — signing, execution, etc. — should strongly consider speaking with an experienced legal professional.

Source: The New York Times, “Noncompete clauses increasingly pop up in array of jobs,” Steven Greenhouse, June 8, 2014

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