Eli5: how exactly can companies enforce non-compete contracts? How is it their business what company you go to, and how would they even know?
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It’s mainly enforced through psychology. Virtually no non-compete agreement is actually enforceable and they get struck down in court all the time. But the threat of being sued, not to mention the time and money costs required to fight the lawsuit even if a win is all-but-guaranteed, deters a lot of people from even trying.
They can’t enforce them here (Sweden), but if a company I’m leaving wanna pay me without working for 6 months with the stipulation I don’t work for a competitor I’ll take it!
In many places, geographic distance plays a part. Want to go into business next door? That’s probably a no-go. Want to go a across town, less enforceable. Different county? Even less enforceable. Different state? Less enforceable. Overseas? Almost completely unenforceable. Likewise it is difficult to prevent someone from earning a living – if their only marketable skill or lifetime of experience is in a particular field, you can’t run them broke or homeless on a no compete, particularly if they can demonstrate they aren’t actively poaching clients, inducing suppliers or co workers to come across to them etc. – often if a former employer wants you ‘on the shelf’ they’ve got to pay a fair amount for your inability to work, either on ‘gardening leave’ where you get paid regularly, or with a ‘golden parachute’ lump sum.
The only thing they can legally protect, usually, are “industry secrets“, genuine ones of which are few and far between. I’ve signed non-competes and gotten out of them fairly easily.
Very hard to enforce anything related to “restrictive covenants” in UK employment law.
Worked for a US based tech firm and when I left after 7 years to a competitor, they tried to invoke clauses in my contract to stop me. Consulted a lawyer and they pointed out the restrictions were too broad (failing to name specific competitors), too long (a year) and if they tried to hold me to them, they’d have to pay me for a year to be on gardening leave. Old company backed down quick.
I then hired 4 other engineers from my old employer into my new company. They tried to do the same to the engineers but we had our lawyer write a rather beautiful letter that told them to fuck right off in legal terms. It worked.
While a lot of people are saying that they aren’t really enforceable (which is mostly true), as I write this, not many people are saying how they would be enforced if a company tried to.
They would sue the ex-employee for breach of contract.
The reason it might be their business to care what company you go to is mostly so that you don’t take knowledge or customers you gained from working for them to other companies. But really those kinds of things can be enforced with other laws.
As for how they would know what company you went to, they would probably look you up on LinkedIn or Facebook or something to see if you went somewhere else. The company most likely wouldn’t actually care to look, but if you made it public they could know.
Non competes generally do not prevent you from working for a competitor. It prevents you from going after their customers for X number of years and also usually have clauses about not telling your new company about all of their inner workings and product usage etc
At least for me in pest control that’s how all of my non competes have read
They are enforceable in the USA as long as they are reasonable in scope, time, and activities restricted.
Epic system in electronic health record business I know has a non-compete in their contract that forbid its consultants to work on their clients’ epic software for 1 year(heard might be 2 now) after they quit.
They enforce it by charging the client a large fee if they find out, and since Epic system pretty much has a monopoly, most clients just don’t want deal with the trouble of hiring an ex-employee before their non-compete expires.
In California, they generally cannot. Here all non-compete agreements are unenforceable except against a person that sells a business (and agrees not to compete with the purchaser).
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