A non-compete clause is a common provision found in employee contracts, with the aim to protect the commercial interests of businesses by preventing their employees from jumping ship to a competitor once gainfully employed.
However, the enforceability of non compete agreement layoff depends upon the reasonableness of its provisions, both temporal and geographical, in order to avoid being deemed void and unenforceable. Effectively, the duration of time you are prevented from operating in a similar field to your previous employment is weighed against the reasonableness or length of notice you would have otherwise received in your employment contract. This tends to be determined by the employee’s wages; the higher the wages, the more leeway you will have. Generally, termination notices are around 2-8 weeks for a non-executive employee, and up to 6 months for an executive-level employee.
However, if you were recently laid off, does this mean that you are free to leave and join a competitor in the same niche? Not so fast. There are some things you should keep in mind. However, if your layoff is genuine, meaning your employer cannot find any available job for you to do, then this will mean that you are free to work anywhere without fear of breaching the covenant.
It is important to note that if you are made redundant, then this is regarded as a “not genuine” layoff, meaning that you are still bound to your non-competition covenant for the length outlined in your employment contract. In more simple terms, if you are laid off for a legitimate purpose, such as the company finances being affected by COVID-19, you may not be bound by the restrictions outlined in your non-compete agreement. On the other hand, if you have been made redundant and offered a golden handshake, you cannot just jump ship and take work immediately for a competitor.
If your non-competition covenant has not been written to reflect such current affairs as global pandemics or corporate takeovers, then the provisions within your non-compete agreement are deemed void, meaning you may work anywhere without your former employer having any way of enforcing your non-compete clause in court.
If the circumstances surrounding your layoff or redundancy are justified, then you (for the most part) do not need to worry about a non-compete agreement that prohibits you from work within your niche market. However, it is still always recommended to check with your local legal expert whether your non-compete agreement is enforceable.
For more information on employment law and non-compete agreements, you can visit the U.S. Department of Labor.
