In the world of business, agreements not to compete (also known as non-compete agreements) are a common practice to protect companies from competition by former employees. However, for such agreements to be enforceable, they must meet certain legal requirements. One such requirement is that the non-compete clause must be ancillary to a legitimate bargain. Quizlet, an online learning platform, has a comprehensive guide that can help anyone understand this concept further.
But what does “ancillary to a legitimate bargain” mean? Simply put, it means that the non-compete agreement must be part of a valid and reasonable business transaction. In other words, the agreement must have some connection to the employment relationship between the employer and the employee.
For instance, a non-compete agreement that is signed after an employee has already started working for a company may not be enforceable if there was no legitimate consideration given to the employee in exchange. In contrast, if a non-compete agreement is part of a job offer letter, it may be considered a legitimate bargain because the employee has received something of value in exchange, such as a job opportunity.
Additionally, if a non-compete agreement`s scope is unreasonable, it may not be considered ancillary to a legitimate bargain. A non-compete agreement only restricts an employee`s ability to work in a particular field or geographic area, and the restriction must be reasonable in both duration and geographic scope. Otherwise, the agreement may be considered a restraint of trade, which violates antitrust laws.
In conclusion, for a non-compete agreement to be valid, it must be part of a legitimate business transaction and be reasonable in terms of scope. Employees should carefully consider any non-compete agreement before signing it, and employers should ensure that the agreement meets all legal requirements. Understanding the meaning of “ancillary to a legitimate bargain” is essential in this process.