Retracting a job offer?
Question: If a new employee refuses to sign a non-compete agreement, can the employer retract the job offer?
Answer: The short answer is yes.
A basic premise of contract law is that there must be offer, acceptance, and consideration in order to form a binding contract. An offer can always be retracted before acceptance. If an employer makes a job offer that includes a non-compete agreement, and a new employee refuses to sign the non-compete, then the employee may reject the offer completely or provide a counter-offer (such as ask that the duration of the non-compete be reduced). At that point, it is open to the employer to either accept the employee’s counter-offer, reject it and retract the job offer, or make another counter-offer. Practically speaking, although these options are certainly available, employers would be well-advised to negotiate in good faith at all times.
As a starting point, employers must remember that non-competition agreements are prima facie unenforceable. They will only be enforced where lesser restrictions, such as non-solicitation clauses, will not adequately protect the employer. For example, if it is clear that clients will follow the former employee, even if she does not solicit them herself, then an employer may be able to successfully demonstrate that a non-compete clause will be needed to protect itself.
When drafting a non-compete clause, employers would be well-advised to consider whether they can demonstrate, if challenged, that their interests cannot be adequately protected by a less restrictive clause such as a non-solicit. If a non-solicit clause would provide sufficient protection, then that is what should be used instead of a non-compete. Practically speaking, it would be wise to include both, so that even if the non-compete is struck out in a court of law, the non-solicit may still be in place. Needless to say, these covenants should be drafted very carefully in order to ensure that they are enforceable.
Employers should keep in mind that even if an employee signs a non-compete, it does not mean that it will be enforceable — not only does a court have to agree that the non-compete is reasonably necessary, but the terms of the covenant must be reasonable as well or it will not be enforceable. On that note, courts will not “fix” restrictive covenants that are overly ambitious or restrictive. For example, if a non-compete restricts the individual for two years, and a court deems one year to be appropriate, rather than reducing it to one year, the court will strike out the clause in its entirety. Employers must be careful: If they ask for too much, they will get nothing.
