Is a non compete clause enforceable if the company is sold?

First, non compete clauses ARE enforceable in California if and only if the employee sells all of his or her interest upon leaving the company and the non compete is part of the stock sale agreement and reasonable in scope. Appreciation of ownership value will only be taxable once the stock is sold.

How long should a non-compete agreement last?

In contrast, in many industries, a Non-Compete with a duration of 6-months will be considered reasonable, and therefore enforceable. The general rule is that the duration of the agreement should not exceed the time reasonably necessary to protect the employer’s legitimate business interests.

Is it possible to void a non-compete contract?

Voiding a non-compete contract is possible in certain circumstances. For instance, if you can prove that you never signed the contract, or if you can demonstrate that the contract is against the public interest, you may be able to void the agreement.

Can you sign a non compete agreement with a former employer?

If your employer presents you with a non-compete agreement and you decide to sign the contract, you are promising not to compete against your employer once your employment ends. In addition to preventing you from signing an employment contract with a competitor of your former employer, non-compete clauses can prevent you from:

What are some common mistakes in a non-compete agreement?

Another common mistake that surfaces when a business is sold is the failure to include an assignment provision in the Non-Compete. Basically, some jurisdictions do not permit the seller of a business’ assets to transfer its Non-Competes to the purchaser unless the employee consents to the assignment.

Can a non-compete agreement be terminated with an acquisition?

Short of that, given the strong public policy against non-compete agreements, the usual changes and employee relationships following an acquisition may be found to be sufficient evidence that the non-compete terminated with the acquisition.

Why do companies ask employees to sign non compete agreements?

However, research has shown that non-competes limit job mobility, accelerate talent flight and discourage venture-capital investments in areas that enforce them. A non-compete agreement, or a covenant not to compete, is a contract that companies ask employees to sign to protect their corporate interests.

What happens to Company B after an acquisition?

Company B will still be around to enforce the Agreement. The answer is less clear, however, when Company B is merged into Company A or where the acquisition takes the form of an asset purchase.

When to consult an attorney for a non-compete agreement?

Another time to consult an attorney: If you’re asked to sign a non-compete as a condition of getting severance when you’re being terminated. In fact, it’s useful to get legal advice before signing anything during a layoff or termination.