As part of my role as a South Carolina non-compete lawyer, I wind up reviewing sometimes dozens of non-compete and non-solicit agreements for South Carolina employees each month, some of which clearly fall into the category of a garbage non-compete (i.e., clearly not written by a lawyer or maybe pulled from the internet, and not enforceable on its face).
For some employees, I’m reviewing the agreement before they sign it or take on a new job, and they want to know (1) what it means, and (2) how it would impact their future career if they sign it and then decide to leave. For others, they’ve already signed it and are thinking about leaving, either due to a terrible working environment or just to seek a better opportunity. And for still others, they’ve already left employment and are getting threatening letters from the company’s lawyers about possible violations of a non-compete, non-solicit, or confidentiality agreement.
No matter the scenario, I still have to review carefully the agreement itself and go through the same analysis based on the existing law. Since South Carolina does not have a specific statute that governs restrictive covenants (like non-competes and non-solicits), we have to go by what the South Carolina Court of Appeals and Supreme Court have said in prior cases. We don’t get many new non-compete related decisions from the courts, so we’re often left with going through cases decided forty, fifty, or even sixty years ago–cases long before the Internet made so much information readily available to everyone–and use those cases to best predict what a judge in our county might decide to do with the non-compete in present day.
What Makes for an Enforceable Non-Compete in South Carolina?
As a quick refresher, South Carolina courts disfavor non-competes as a restraint on trade. But courts will enforce the agreements if they meet specific requirements: (1) the agreement is supported by valuable consideration (new employment, or if currently employed, a payment of money); (2) necessary to protect a legitimate interest of the company; (3) not unduly harsh and oppressive in curtailing the employee’s legitimate efforts to earn a livelihood; and (4) otherwise reasonable from the standpoint of sound public policy. The non-compete must also be reasonably limited in terms of time and space. That’s the length of time that the non-compete lasts and the geographic territory that the non-compete covers. For non-solicitation provisions, a customer-based restriction can replace the geographic requirement.
The courts have also held that if a covenant not to compete is defective in one of the above-referenced areas, it is totally defective and cannot be saved, stating “[w]e must uphold the covenant as written or not at all, it must stand or fall integrally.” It’s up to the court to determine whether the non-compete is reasonably limited, so the enforceability is ultimately determined by a judge, not a jury.
If you get sued on a non-compete agreement, the company often seeks a preliminary injunction against the employee, which is a court order preventing the employee from engaging in specific behavior while the lawsuit is pending. The court has a hearing first, and if the injunction is issued, the employee could still file an appeal, though the lawsuit will continue.
How Do I Know if MY Non-Compete Agreement is Enforceable?
With all non-compete reviews, there is no black and white answer. As a South Carolina non-compete lawyer, I have to juggle the language of the contract, the applicable case law, which judge I might get in front of, the personality and experience of the lawyer representing the company, and the facts of the case.
I see non-competes that are drafted very carefully and narrowly, and these are more likely to be enforced. And sometimes, I see non-competes that are written so broadly and poorly that even with all these variables mentioned above, I’m confident that no judge in South Carolina would ever enforce it. That a garbage non-compete, and they’re always fun to read.
What Makes a Garbage Non-Compete?
For a recent consult, I reviewed an employment agreement that had a non-compete provision and non-solicitation provision that lasted well over SEVEN YEARS. Remember above that courts will only enforce a non-compete if it’s reasonably limited in terms of time and space. South Carolina courts have historically held that non-competes up to three years may be reasonable in terms of length (though I rarely see longer than one to two years these days).
For non-competes related to the sale of a business, however, the time periods may be longer. If you sell your business to another company, the buyer can require you to agree that you won’t start a competing business down the road for five or more years, and courts find that longer time period is permissible. But for most employees, you’re signing the agreement when you start employment, not when you sell a business, so 1-3 years is what you will likely see.
Seven years is, on its face, completely unenforceable. No judge in South Carolina would enforce that, because enforcing that would violate the current standard set up the S.C. Supreme Court.
Other issues in this non-compete include a geographic territory that is based on where the company does business, not where the employee actually worked or made contact with customers. If the company does business in five counties in South Carolina, but the employee only ever sold to customers in Greenville County, then the geographic scope is too broad and is unenforceable. So again, on its face this agreement is unenforceable. The geographic scope must be reasonably limited to where the employee had contact with customers.
Another problem with the non-compete is that it seeks to prevent the employee from working for a competitor in ANY CAPACITY during the non-compete period. That means that the employee could not even go work as a janitor for a competing company, because that would violate the non-compete as written. South Carolina courts are clear that the restriction must be limited to the services or role performed by the employee while he or she worked there.
Takeaways for South Carolina Employees
Having your non-compete agreement reviewed by a South Carolina non-compete lawyer is always a good idea. You may be able to negotiate the terms on the front end, and at the very least, you’ll better understand how the non-compete agreement would impact your future career when you decide to leave.
Also keep in mind that even though the garbage non-compete agreement may be unenforceable in my opinion, the company may still decide to sue you anyway. They might lose, but you’ll have spent a great deal of money in defending yourself. Or a judge could even disagree with me, as silly as that might be. Can you even imagine?
Anyway, be mindful of your rights, made sure you understand what you’re signing, and talk to a lawyer if you have any questions.
