An employer bringing a lawsuit may also be asked to identify a protectable business interest that was harmed by the employee's move to a different firm.
As far back as Dyer's Case in 1414, English common law chose not to enforce non-compete agreements because of their nature as restraints on trade.
[6] That ban remained unchanged until 1621, when a restriction that was limited to a specific geographic location was found to be an enforceable exception to the previously absolute rule.
Almost a hundred years later, the exception became the rule with the 1711 watershed case of Mitchel v Reynolds[7] which established the modern framework for the analysis of the enforceability of non-compete agreements.
[2] When courts consider the enforceability of non-compete agreements, they usually ask the employer to identify a protectable business interest that was harmed by the employee's move to a different firm.
[2] University of Chicago Law School Professor Eric A. Posner has argued that since non-competes have an adverse impact on competition, they should be covered under a strong anti-trust regime, and the "law should treat noncompetes as presumptively illegal, allowing employers to rebut the presumption if they can prove that the noncompetes they use will benefit rather than harm their workers.
[3][1] Existing evidence suggests that the wage suppressing effects of non-competes are disproportionately concentrated on lower-income workers.
[1] Non-competes may reduce overall hiring costs and employee turnover for companies, which may result in savings that could in theory be passed on to customers in the form of lower prices and to investors as higher returns.
The employer must pay financial compensation for the duration of the CNC, amounting at least half of the gross salary for the corresponding period.
The 2009 Supreme Court of Canada case Shafron v. KRG Insurance Brokers (Western) Inc. 2009 SCC 6 held a non-compete agreement to be invalid due to the term "Metropolitan City of Vancouver" not being legally defined.
[17] In France, CNCs must be limited in time to a maximum of two years and to a region where the employee's new work can reasonably be seen as competitive.
In the Netherlands, non-compete clauses (non-concurrentiebeding or concurrentiebeding) are allowed regarding issues such as moving to a new employer and approaching customers of the old company.
[23] According to Section 27 of the Contract Act, 1872, any agreement that restrains a person from exercising a lawful profession, trade or business is void.
[31] In the Crown dependencies, many financial and other institutions require employees to sign 10-year or longer CNCs which could be seen to apply even if they leave the country or enter an unrelated field of work.
[citation needed] In May 2023, the UK Government announced plans to limit non-compete clauses to a maximum of three months.
[4] In March 2019, Democratic officials, labor unions, and workers' advocacy groups urged the U.S. FTC to ban non-compete clauses.
A petition to the FTC, seeking a ban on noncompete clauses, was submitted by the AFL-CIO, SEIU, and Public Citizen.
[42] The commission noted that the existing legal frameworks governing non-compete clauses—formed decades ago, without the benefit of this evidence—allow serious anticompetitive harm to labor, product, and service markets to go unchecked.