Updated July 28, 2022
A North Carolina non-compete agreement prohibits an employee from providing services of the same nature as the employer. This restriction is required to be in writing and outlined by time and geographical territory. In addition, valuable consideration must be included that is outside the standard terms in an employment contract ($500 has been deemed reasonable).
Laws
Legally Enforceable?
Yes , a non-compete is legally enforceable if it is:
- In writing (per § 75-4 ) ;
- Reasonable as to the time and territory;
- Made a part of the employment contract;
- Based on valuable consideration ; and
- Designed to protect a legitimate business interest of the employer.
Source: Hartman v. WH Odell and Associates, Inc. (1994)
Restricted Occupations
The following occupations are restricted from entering into a non-compete:
- Attorneys ( Rule 5.6 )
- Locksmiths ( 21 N.C. Admin. Code 29.0502(e)(5) )
Continued Employment
An employment contract is not enough to support valuable consideration. It is recommended that something outside of the employment-employee agreement be included for the non-compete to be valid.
For example, the Court of Appeals has determined $500 to be sufficient valuable consideration. In addition,
Source: Hejl v. Hood, Hargett & Associates, Inc. (2009)
Maximum Term
5 years has been determined to be reasonable in “extreme conditions.”
Source: Engineering Associates v. Pankow (1966)
Time and Territory
Both the time and territory restrictions must be viewed “ in tandem .” Therefore, if a larger area is covered in a non-compete, the duration should be lesser, and vice-versa.
Source: Precision Walls, Inc. v. Servie (2002)
Territory Restrictions
The Court of Appeals has determined the geographical area for a non-compete should be:
“A restriction as to territory is reasonable only to the extent it protects the legitimate interests of the employer in maintaining [its] customers.”
Source: Hartman v. Odell and Assoc., Inc. (1994)
Blue Penciling
If a non-compete agreement has a severability clause , a court in North Carolina may enforce the reasonable portions.