Over the last decade, non-compete agreements (which are sometimes referred to as covenants not to compete) have become increasingly popular. 

Employers who utilize non-compete agreements should review them regularly to ensure that they are enforceable. Even well-drafted agreements that were adequate at the time they were implemented may not be enforceable due to changes in law. 

In North Carolina, non-compete agreements are disfavored and highly scrutinized. In general, for a covenant not to compete to be enforceable, it must be: (1) in writing; (2) made a part of the employment contract; (3) based on valuable consideration; (4) reasonable as to time and territory; and (5) designed to protect a legitimate business interest of the employer. Courts will not re-write any of the restrictions, even if the parties expressly authorize them to do so. Therefore, it is imperative that non-compete agreements be carefully and thoughtfully prepared, and contain each of the required elements. 

Here are just a few of the many potential pitfalls that employers may face:

1. Employers fail to provide consideration (i.e., something of value) for the non-compete agreement

In North Carolina, initial employment can serve as consideration for a non-compete. However, continued employment, without more, is not sufficient. Accordingly, employers must either require employees to sign non-compete agreements at the inception of employment or provide something else of value—for example, a one-time payment of $100, which the North Carolina Court of Appeals has held to be sufficient.  

2. Agreements that contain “evergreen” provisions  

Some employment agreements are for a set term (often one year) and automatically renew at the end of the term. A few years ago, the North Carolina Business Court, applying Kentucky law, ruled that an employer must provide consideration for the non-compete agreement at the time of each renewal. 

The Business Court has not yet been asked to interpret a similar provision under North Carolina law but, because Kentucky’s requirements are similar to North Carolina’s, employers should consider eliminating evergreen provisions from their employment agreements. 

3. The non-compete covenant is overly broad 

Courts have found that non-compete agreements that bar an employee from working in an identical position for a direct competitor are enforceable in North Carolina. However, an employer may not prohibit a former employee from having any association with a business providing similar services, including performing wholly unrelated work. (For example, an employer may not prohibit a former executive from working as a custodian for any entity that provides similar services.) Such prohibitions are overbroad and unenforceable.  

If you would like help preparing or reviewing non-compete agreements for your employees, please contact the GS attorney with whom you usually work, or you can reach out directly to Tyler Peacock or Jared Gardner. 
Last month, the EEOC filed its first lawsuit against an employer due to its alleged failure to reasonably accommodate an employee’s request related to COVID-19. The EEOC alleges that an employer unlawfully denied an employee’s request to work from home two days per week and ultimately terminated her employment. 

Ronisha Moncrief (“Moncrief”), who has chronic obstructive lung disease and hypertension, worked at a manufacturing facility owned by ISS Facility Services, Inc. (“ISS”). Beginning in March 2020, ISS required all of its employees to work remotely four days per week because of the COVID-19 pandemic. However, in June 2020, ISS required all of its employees to return to work at its facility five days per week. Moncrief requested that she be allowed to continue working from home two days per week. Despite allowing other employees in Moncrief’s position to work from home, ISS denied Moncrief’s request. Thereafter, two months later, ISS terminated Moncrief’s employment due to alleged “performance issues.”

The EEOC is seeking back pay, compensatory damages, and punitive damages, as well as injunctive relief. 

If your employee has a disability covered by the Americans with Disabilities Act and requests a reasonable accommodation, you should engage in the ADA-required “interactive process” to help identify potential reasonable accommodations that would enable the employee to perform the essential functions of his or her position.  

If you have questions about accommodations required by the Americans with Disabilities Act, please contact the GS attorney with whom you usually work, or you can reach out directly to Tyler Peacock or Nicole Gardner.

Tyler Peacock
(704) 390-7045 direct