New jobs are stressful–the contents of non-compete agreements certainly don’t help. For most South Carolina employees, starting a new job comes with a wave of stress and a unique set of challenges. The employee will have to integrate into the new company culture, develop new working relationships, navigate the unfamiliar bureaucracy, and master new job skills, all within a short period of time. And on top of that, the employee typically spends several hours at the beginning of employment reviewing and signing piles and piles of paperwork, some of it containing significant legal implications that the employee is not aware of.
Often, the employee will be presenting with an employment agreement of some kind. These agreements can be called an “Employment Agreement,” or a “Confidentiality” or “Non-Disclosure Agreement,” or a “Non-Compete” or “Restrictive Covenant Agreement.” Whatever series of long and intimidating words the company chooses to place at the head of the page, the result is the same: the employee is confronted with reviewing a multi-page legal contract in a highly pressurized environment and generally without the benefit of an attorney to explain exactly what the contract’s terms even mean.
Best practice for a company would be to include a copy of the proposed Non-Compete Agreement with the offer letter so that the employee has time to schedule a consult with an employment lawyer before signing, but that is not always how it happens. The HR person giving you the agreement also has twenty other documents she needs you to review and sign quickly so you can get to work, so you often end up feeling compelled to sign the agreement without really understanding the implications. (The irony of this intentional pressure cooker the company places you in is that the agreement itself will commonly say that the employee had time to read, understand, and seek legal counsel before signing the agreement. That’s what lawyers call a “legal fiction,” and what plaintiffs’ employment lawyers call BS.)
I will always recommend that an employee seek to have her lawyer review the agreement before she signs, but I certainly understand that sometimes employees do not feel like that they have option.
So What Are the Most Common Provisions in These Non-Compete Agreements that South Carolina Employees Need to Look Out For?
Non-compete and non-solicit agreements fall into a category of contract called “restrictive covenants.” What that means is, if you sign the agreement, then you are agreeing that your activities after you leave that employer will be restricted or limited in some way.
A non-compete provision restricts WHO you can work for (another company), WHERE you can work (the geographic location), and for HOW LONG you are subjected to these restrictions (length of time). South Carolina courts don’t like non-compete provisions because they’re a restraint on trade and on an employee’s ability to freely work in this state. But courts will enforce a non-compete if it is reasonable in time (typically no more than two years), reasonable in geographic scope (only covers the area where the employee worked or made contact with customers), is narrowly tailored to protect a legitimate business interest of the company (doesn’t prevent you from working altogether in your chosen field), and is supported by valuable consideration (you signed it before you started your new job or they paid you some amount of money in exchange for signing).
If the agreement is drafted properly and the non-compete is therefore likely enforceable, then the employee may have a more difficult time finding another job later. And even if the non-compete is likely UNENFORCEABLE, meaning that the courts may not hold the employee to it at trial, that doesn’t prevent a company from suing an employee anyway. As I often tell clients, I can tell you all day that the agreement is likely unenforceable, but my opinion is worth whatever you paid me for the consult. If you want a judge’s opinion on the matter, it’s going to cost thousands and thousands of dollars to find out. Companies often use their large monetary budget to bully employees regarding new jobs, just because the employee is much less likely to be able to afford legal representation if the matter goes to a lawsuit.
Employees may also see a “non-solicitation” provision in the contract as well. Non-solicits must also be limited in time and must be narrowly tailored, but there’s no geographic restriction. Instead, the employee would be agreeing to not solicit any customers of the company for a certain period of time after leaving employment. Courts seem more willing to enforce these non-solicit agreements, since the employee can still go work anywhere, but the company’s customers are protected from solicitation for a certain period of time.
Confidentiality or non-disclosure provisions are commonly written into the contract as well. These provisions prevent an employee from taking or misusing company documents or information during or after employment.
Attorney’s fees provisions are often added to the agreement in a one-sided fashion. This part of the contract would require the employee to pay the THE COMPANY’S attorney’s fees, in addition to whatever the employee pays his own lawyer to defend the case.
Forum selection clauses provide for an employee to be sued in a particular state. Most South Carolina companies want to be able to sue in South Carolina for convenience’s sake, but for national companies who hire an employee to work in South Carolina, the agreement may provide that the employee agrees to sue or be sued only in the state where the company’s headquarters is. A South Carolina employee having to defend herself in California or Michigan or Hawaii or wherever else is extremely inconvenient and expensive.
What Are the Consequences of Signing a Non-Compete Agreement or Non-Solicitation Agreement?
Once you sign the agreement, you are bound by the provisions (if they are enforceable). That means you can be sued in state or federal court. Very often, once the company sues an employee, the company will seek a preliminary injunction, which is a court order preventing the employee from competing or soliciting while the lawsuit continues. The court will hold a hearing and could issue the injunction. If the employee violates the court’s order, the employee can be fined or even jailed for contempt of court.
The company will likely seek damages caused by the employee’s actions, such as lost profits or lost customers, as well as attorney’s fees. The company can dig into an employee’s text messages, phone records, emails, and personal documents during the course of litigation, and the employee have his deposition taken, under oath, in what is typically the most stressful part of a lawsuit prior to trial.
While many of these types of claims and lawsuits can be resolved early, some cannot. And those cases that continue in litigation can be very expensive for an employee to defend, both in terms of the amount paid to your attorney to defend the case and in terms of the stress and emotional weight that comes from being sued.
Key Takeaways for South Carolina Employees
If you have the option of having your agreement reviewed by an employment attorney, then I highly recommend that you do so. Consults are not free, but the value that comes from understanding your legal obligations is immense. And consider carefully the impact that this agreement will have on your ability to find another job. It’s easy to think that you’ll be at this new company forever, but that is very rarely the case. At some point, you will want or need to change jobs, and you should try to think ahead in terms of the possible consequences that signing this non-compete or non-solicit agreement will have.
Also, always make sure you get a copy of the final signed agreement for your records. If you don’t, then you’ll have to ask for a copy later when you’re planning to leave, which will alert the company to your intentions to leave and can cause problems before you’re ready to deal with them.
If you have any questions about the contents of non-compete agreements or non-solicit agreements, please feel free to reach out to a South Carolina Non-Compete Lawyer (Hey, that’s me! And yes, that’s how I introduce myself to my kids each evening when I return from work, just so I can get some respect around the house!).