Employers regularly have their employees sign non-competition and non-solicitation agreements. These agreements come in many forms and may form separate agreements between the employer and employee, or may be inserted into the general employment agreements. No matter what form these agreements take, their significance to an employee cannot be overstated.
The consequence to an employee of an enforceable non-competition or non-solicitation agreement can severely limit an employee's future employment options should they decide to leave the employer's employment to go into business for themselves, or work for a competitor of their former employer.
An employee who leaves secure employment (giving up his severance entitlement) with the belief that their non-competition agreement is unenforceable can be met with an injunction (an order to cease work) and a law suit seeking substantial damages. Despite the merits of the law suit, the employee will be required to spend substantial funds defending the law suit.
In many cases a non-competition or non-solicitation agreement will be found to be unenforceable because it fails to satisfy the relevant legal test. Nevertheless, any employee that executes an non-competition or non-solicitation agreement faces the risk that the clause may be enforceable. Given the severity of the potential consequences of a finding that these agreements are enforceable, all employees should obtain legal advice prior to executing any such agreements.
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