Article originally appeared in the Fall 2007 issue of The Professional Engineer
Employee Non-Compete Agreements in North Carolina
By Douglas P. Jeremiah, P.E., Esq.
Engineers in North Carolina are increasingly being required to sign non-compete
agreements with their employer as a condition of employment. Employers have a
legitimate interest in protecting their investment of training and compensating their
employees. But don’t employees also have a right to make a living in their chosen fields?
Are non-compete agreements enforceable? As always, the answer is – it depends.
North Carolina appellate courts have addressed the enforceability of employee non-
compete agreements numerous times. These opinions have produced several factors for
North Carolina courts to consider in determining enforceability of a specific agreement.
Whether a specific non-compete agreement is enforceable will depend on the application
of the following factors and the specific facts involved in the employment relationship.
Historically, North Carolina courts disallowed any type of employee non-
compete agreement as an invalid restraint on trade. Approximately 100 years ago, the
courts began recognizing the right of employers to protect legitimate business interests in
restraining competition from former employees. The restraint, however, must be related
to the protection of the employer’s trade secrets or other proprietary information,
preventing the employee from using intimate knowledge of the employer’s business, or
preventing personal interaction with the employer’s customer base for the benefit of
another employer. The non-compete agreement must not be for the purpose of restricting
ordinary competition from a former employee.
Non-compete agreements are required by statute in North Carolina to be in
writing and signed by the employee. The employee’s agreement not to compete must be
based on valuable consideration, in other words, the employee must receive some type of
benefit for his/her agreement not to compete. The initial employment of the employee is
accepted as fulfilling this requirement. However, if a non-compete agreement is executed
after the employee begins employment, then the employer must offer new consideration
to the employee, such as a salary increase, bonus, or promotion.
Once it is determined that valuable consideration exists, the court applies
reasonableness tests to the duration and the geographical scope of the restriction. When
the courts began to find non-compete agreements enforceable, they would allow the
agreement to be of long duration, even one extending up to the lifetime of the employee.
Since then, the courts typically limit the duration of the agreement to five years, and even
then only in exceptional circumstances. In determining the reasonableness of the
duration, the courts will concurrently consider the geographical range. For instance, the
longer the duration, the smaller the geographical range will be allowed, and vice versa.
As with the early courts’ liberal allowance of duration in non-compete
agreements, large geographical scopes were traditionally allowed. Presently, the courts