Enforceability Of Noncompete Agreements

It seems like every employee in every industry, field, and profession is governed by a noncompete agreement these days.  Two myths that I often hear about noncompete agreements are that they are always enforceable or that they are never enforceable.  The truth actually lies somewhere in between those extremes.

The bottom line is that employees need to take noncompete agreements very seriously because employers sure do.  If there is one thing that employers will always sue former employees for, regardless of the cost, it’s violation of noncompete agreements.  The consequences of such a business practices or contract law lawsuit can be financially devastating, even if you win, so you need to be careful that you give as much respect and thought to your noncompete agreement as your employer does.

No Iowa law categorically invalidates noncompete agreements.  They can be enforced by the courts like any other contract.  Employees are taking a risk if they just ignore and violate them.  Your best course is to have the noncompete agreement reviewed by an attorney before you sign it.  Your next best choice is to have the noncompete agreement reviewed by an attorney before you decide to potentially break it.  An attorney can give you a better idea of the enforceability of the agreement and the meaning of its restrictions.  An attorney may also be able to help you negotiate a more favorable noncompete agreement that protects your employer’s interests while still allowing you to work elsewhere.

Because of the myth that noncompete agreements are never enforceable, I have seen people get themselves into bad situations that have no easy way out because they go to work for a competitor in complete disregard of a noncompete agreement that they have with a former employer.  To put it bluntly, if the former employer threatens a lawsuit over the violation of the noncompete agreement, the former employee is basically looking at three distasteful options: (1) find a new job that doesn’t violate the noncompete; (2) pay the former employer a lot of money to settle the breach of contract claim; or (3) pay a lot of money for an attorney to defend the breach of contract claim in court.

The consequences of violating a noncompete agreement can be more serious than people realize.  You can be forced by the court to stop working for the competitor.  You may be ordered to pay money damages to your former employer.  You may be ordered to pay your former employer’s attorney fees.

In sum, litigation over a noncompete agreement should be avoided if possible through a preventative consultation with an attorney.  If the noncompete agreement is likely enforceable, than you should avoid violating it or ask the attorney to try to negotiate a modification of the agreement.   Once you have gone to a competitor and your former employer threatens litigation if you don’t stop the competing employment, it is usually too late to avoid the problem or try to work something out with your former employer.