Many people wonder how non-competition agreements hold up. In general, they are enforceable in accordance with state law. So, a non-competition agreement in California is probably not enforceable or is very limited. In Maryland, they are enforceable, but they’re not given free rein.
Non-competition agreements and non-solicitation agreements are part of a group of agreements called restrictive covenants. Courts generally agree that it is in the public interest for people to be employed. Public policy is in favor of full employment because people can then pay income taxes and be independent. So the courts don’t like restrictions on people getting jobs, but will enforce restrictive covenants if certain strict limitations are met. And they vary from state to state.
In Maryland, they are enforced if the restriction is narrowly tailored to meet the company’s protectable interest. For example, I run a law firm. If I had a non-competition agreement with the lawyers that work with me, and I said “If you leave here you can’t practice law in competition with this firm anywhere in the United States,” a court would say, “How is North Carolina, Wyoming, or South Dakota a protectable interest of your firm? What clients do you have there that have to be protected from poaching?” In my case, I don’t have clients in those areas. So I would have to narrowly tailor a non-competition agreement to the geographic area that would be a protectable interest.
Similarly, restrictive covenants can’t go on forever. Courts across the country generally say 12-18 months is a reasonable period, but when you get beyond that – absent special circumstances – then courts often decline to enforce them. So non-competition agreements have to be reasonable, they have to meet certain restrictions in terms of geography, in terms of time, and in terms of scope.
Have questions about non-competes? Give us a call at 410-584-1110.