Legally Enforceable?
Yes, a non-compete is legally enforceable if it is:[1]
- In writing[2];
- Reasonable as to the time and territory;
- Made a part of the employment contract;
- Based on valuable consideration; and
- Designed to protect a legitimate business interest of the employer.
The following occupations are restricted from entering into a non-compete:
Continued Employment?
An employment contract is not enough to support valuable consideration. It is recommended that something outside of the employment-employee agreement be included for the non-compete to be valid.
For example, the Court of Appeals has determined $500 to be sufficient valuable consideration.[5]
Maximum Term
5 years has been determined to be reasonable in “extreme conditions.”[6]
Both the time and territory restrictions must be viewed “in tandem.” Therefore, if a larger area is covered in a non-compete, the duration should be lesser, and vice-versa.[7]
The Court of Appeals has determined the geographical area for a non-compete should be:[8]
“A restriction as to territory is reasonable only to the extent it protects the legitimate interests of the employer in maintaining [its] customers.”
Blue Penciling
Sources
- Hartman v. WH Odell and Associates, Inc. (1994)
- § 75-4
- Rule 5.6
- 21 N.C. Admin. Code 29.0502(e)(5)
- Hejl v. Hood, Hargett & Associates, Inc. (2009)
- Engineering Associates v. Pankow (1966)
- Precision Walls, Inc. v. Servie (2002)
- Hartman v. Odell and Assoc., Inc. (1994)
- Digital Recorders v. McFarland (2007)