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David Newton

Restrictive covenants in employment contracts: non-competes, non-solicitation and confidentiality clauses, how enforceable they are, and when to pay for legal advice

An offer from a competitor, and the three questions that decide what it costs you

You have a competing offer and a signed agreement in a drawer. Three questions decide what walking costs: what the clause says, what your state does with it, and what your employer will do.

An offer from a competitor, and the three questions that decide what it costs you

Find every signed document

Restrictions often hide in equity grants, bonus plans, and handbook acknowledgments rather than the original offer letter. Long-tenured employees commonly have several overlapping versions signed at different promotions.

ItemWhat it means
Clause type sets the riskA customer non-solicitation, an employee no-hire, and a true non-compete are three different problems with three different odds of enforcement. Identify which one you actually signed before estimating exposure.
The clock may not be runningSome agreements toll the restricted period for any time you spend in violation, so the deadline does not simply pass while you wait it out. Check the tolling language before assuming the date on the calendar is the end.
Geography and competitor definitionsAn overbroad territory or a definition of competitor that sweeps in half an industry is the most common weakness in a drafted clause. Courts in some states narrow these rather than voiding the whole agreement.

Most people read their restrictive covenant for the first time in the week they are handed a competing offer, which is usually January, sometimes late spring after bonuses clear, and often the last two weeks of a fiscal quarter when the hiring company wants a body in a seat before the numbers close. The offer has a deadline. The agreement was signed years ago, possibly on a first day, possibly in a stack of onboarding paperwork you skimmed. The gap between those two moments is where the panic lives, and the panic is expensive, because it pushes people into either turning down good work they were free to take or walking into litigation they could have priced in advance.

Separate the three questions before you do anything else

There are only three questions that matter in the first week, and they are not equally hard. The first is what the document actually says, which you can answer yourself in twenty minutes with a highlighter. The second is what your state's courts do with language of that kind, which varies enormously and which you cannot reason out from first principles. The third is what your particular employer, with its particular general counsel and its particular history, is likely to do when your resignation lands. Answer them in that order, because the cost of the decision changes at each step.

Confusing the three is what turns a manageable problem into a costly one. A worker who reads the phrase "shall not compete" and assumes the worst declines an offer worth real money. A worker who hears that non-competes are unenforceable in general, which is true in some states and false in others, resigns on a Friday and gets a demand letter on Monday. The questions are separate, they have separate answers, and only the third one depends on anybody's judgment call about human behavior.

What the clause says, and what kind of clause it is

Find the agreement first. It may be the offer letter, an employee handbook acknowledgment, an equity award, a bonus plan, or a standalone agreement signed at promotion, and it is common to have signed three or four documents with overlapping and inconsistent language over a long tenure. The most recent one usually governs, though not always. Then identify which restriction you are actually looking at, because a true non-compete, a customer non-solicitation, an employee no-hire, and a confidentiality clause carry wildly different risks, and the clause most people fear is usually not the one they signed.

Read the scope with a calendar in hand. A twelve-month restriction that started running the day you gave notice is a different problem in March than the same clause was in November, and some agreements toll the period during any violation, which means the clock does not simply expire while you wait. Note the geography, the definition of competitor, whether the restriction reaches customers you never touched, and whether there is a garden leave or continued-pay provision. Those details set the ceiling on what anyone can realistically demand from you.

What your state does with it, and what the employer will do

State law is the variable that swamps everything else. Some states void employee non-competes outright by statute, some enforce them only above a salary threshold, some require advance notice before signing, and some will take an overbroad clause and narrow it to something reasonable rather than throw it out. Texas, Florida, and California sit at very different points on that spectrum, and the Federal Trade Commission has been the federal body examining non-compete practices as a competition matter, which is worth watching but does not change what a state judge will do with your contract this quarter.

Employer behavior is the last question and the one that actually determines your out-of-pocket cost. Most departures produce nothing. A minority produce a reminder letter to you and a copy to your new employer, which is cheap for them to send and alarming to receive. A small number produce a motion for a temporary injunction, filed fast, which is where the real money is, both in fees and in a new job that may evaporate while the motion is pending. Past behavior predicts future behavior better than the contract language does, so ask former colleagues who left for competitors what happened to them.

Where paying for advice earns its fee

The honest cost picture is lopsided. A single consultation, priced as one or two hours, buys you a read of the document, a plain answer on your state's rule, and a realistic estimate of exposure, which is often enough to accept the offer with your eyes open. Once a letter arrives, the numbers change by an order of magnitude, and once an injunction is filed they change again. That asymmetry is the whole argument for spending money early: the cheapest hour you will ever buy is the one before you resign.

It is also the argument for local counsel rather than general advice, because enforcement is a state-by-state, county-by-county business, and searching for a non compete lawyer near me is a reasonable first move when the restriction, the employer, and the courthouse are all in the same state. Bring the signed documents, the offer letter, and a one-page description of what you actually did in the job. An attorney who has the paper in front of them can price your risk in a way no article can, and can often tell you in the first half hour whether this is a real fight or a formality.

The offer has a deadline, and the deadline is the only genuinely urgent thing in the file. Work the three questions in order, get the document read by someone who knows your state before you give notice, and keep the calendar in view, because a restriction that looks immovable in January is frequently a short walk from expiring.

State law dominates the outcome

The same paragraph can be unenforceable in one state, enforced as written in a second, and rewritten by a judge in a third. Where the case would be filed matters more than how the clause is phrased.

Federal attention, state enforcement

The Federal Trade Commission has examined non-compete practices as a competition issue at the national level. Day-to-day enforcement still happens in state courts under state rules.

Most departures produce nothing

The majority of people who leave for a competitor never hear from their former employer's lawyers. Ask colleagues who already made the same move what actually happened to them.

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