February 5, 2023

Volume XIII, Number 36

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February 03, 2023

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You Thought You Were Protected? When a Non-Compete Isn’t Enforceable (Maybe)

If you have or want enforceable non-compete agreements with employees, read on. 

Here’s a hypothetical: You are looking to hire a salesperson, and you find just the right person, John. Your company has a great non-compete agreement that will ensure that when John leaves your employment, he cannot work for a competitor for two years. To save time on his first day, HR sends an onboarding package to John, asking him to complete the new hire paperwork, including the non-compete agreement, and return it. John signs the non-compete and sends it in. You and John agree that he will start work in two weeks, and John gives notice to his current employer. Perfect, right?

Some States Won’t Enforce Non-competes Unless the Person Was an Employee at Signing

As we all know, non-compete law is state-specific. At least two states, Alabama and Louisiana, require that a person be an employee when he signs the noncompete or it is not enforceable.

  • Alabama’s requirement is part of its statute and allows restrictive covenants with employees, which has been read to require that the person actually be employed when he or she signs a non-compete agreement.

  • Louisiana’s requirement stems from a recent Fifth Circuit case, Rouses Enterprises, LLC v. Clapp. In the Rouses matter, James Clapp signed a non-compete and started work sometime later. The court held that the agreement was not enforceable because he was not an employee at the time of signing.

Check the Law of your Jurisdiction

The moral of the story is that non-competes are tricky and the law can change. In some jurisdictions, such as Alabama and Louisiana, you have to get the employee to sign the agreement on or after employment starts. This can mean that a non-compete that you get from a terminated individual (as part of a settlement agreement) may not be enforceable.

Check your state law requirements on all aspects of the agreement. You don’t want to have a great non-compete that you can’t enforce.

© 2023 Bradley Arant Boult Cummings LLPNational Law Review, Volume XII, Number 342

About this Author

Anne R. Yuengert Employment Attorney Bradley Birmingham

Anne Yuengert works with clients to manage their employees, including conducting workplace investigations of harassment or theft, training employees and supervisors, consulting on reductions in force and severance agreements, drafting employment agreements (including enforceable noncompetes) and handbooks, assessing reasonable accommodations for disabilities, and working through issues surrounding FMLA and USERRA leave. When preventive measures are not enough, she handles EEOC charges, OFCCP and DOL complaints and investigations, and has handled cases before arbitrators...

J. William Manuel Litigation Attorney Bradley Jackson, MI

Will Manuel focuses his practice primarily on commercial and employment litigation. He has handled various disputes for both large and small businesses in both Mississippi and other jurisdictions.

Will's clients include numerous manufacturers and commercial interests as well as various insurance and financial services companies. He has worked to defend these clients in both MDL litigation and individual actions brought in Mississippi. Will also has experience in advising businesses on issues involving age discrimination, sexual harassment and...

John P. Rodgers Employment Attorney Bradley Nashville

John Rodgers helps employers solve their employment-related problems. His practice is three-fold. First, he counsels clients on the numerous situations that can arise related to their employees, including termination and disciplinary decisions, reasonable accommodation issues under the Americans with Disabilities Act (ADA), wage-and-hour issues under the Fair Labor Standards Act (FLSA) and state law, and Family and Medical Leave Act (FMLA) problems. His goal is to work with clients in a practical, problem solving way.

Second, John helps clients...