How long can an employer institute a non-compete clause in a hiring contract?

As an HR manager, you make dozens of hiring decisions every day. Some of the people you hire may inquire about the non-compete clause in their hiring contract. Non-compete agreements are primarily governed by state law. Generally, states uphold the enforceability of non-compete clauses, but the length of that enforceability varies from state to state, according to the American Bar Association.

Overview of State Law

In most states, courts favor enforcing contractual agreements, including non-compete clauses; the main difference is that each state has its own statute of limitations defining how long the clause is valid. You’ll need to do a bit of research to find your own state’s governing law. To do this, the most efficient method is to simply Google statute of limitations non-compete clause and the name of your state. For example, if you were to conduct the search for Texas, you’ll find that in Texas, the clause needs to contain a limitation of time regarding the validity of the clause.

The Three Outliers

There are always going to be a few outliers that are different from the law that most states follow in a similar fashion. In this case, the outliers are California, North Dakota, and Texas. Each of these states treat non-compete agreements as generally unenforceable. For instance, in California your go-to source is Section 16600 of the California Business and Professions Code. The code indicates that even if a non-compete clause is written into a California employment contract, the employee can still practice in another profession, trade, or business of any kind that directly competes with his or her current employment.

Helpful Links:

Mistakes to Avoid As a Human Resources Professional Handling a Non-Compete Agreement