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Failure to Limit Scope of North Carolina Non-Compete Dooms Another Attempt to Restrict Former Employees

    Client Alerts
  • December 13, 2013

In recent years, North Carolina courts have cracked down on what they view as the overbroad reach of many post-employment non-compete covenants. In past years, overbroad usually meant excessive time or territory. However, the more recent cases have looked at the actual restrictions and how they relate to the former employee’s ability to unfairly compete against the company.
Clinical Staffing, Inc. v. Worldwide Travel Staffing Ltd. was a federal Eastern District of North Carolina case involving a dispute between two travelling nurse employment agencies. The plaintiff accused its competitor of interfering with its contracts with nurses by hiring and attempting to hire them. The plaintiff pointed to provisions of the agreements that prohibited the nurses from providing services to any company clients for six months following departure from employment. The defendant contended that these restrictions were overbroad and unenforceable.
The District Court agreed with the defendant, invalidating the non-competes under North Carolina law. The court noted that the agreements did not limit the nurses to providing nursing services. Presumably, the restrictions would apply to food preparation, secretarial or other services unrelated to the employer’s business. Also, the agreements prohibited the nurses from working with any clients of the business, not just those where the nurse was placed during his or her work.
The court invalidated the non-compete as a matter of law, despite no evidence that the former employer ever tried to use it to apply the hypothetical broader scope. North Carolina employers should understand that many older non-compete agreements drafted before this line of cases are no longer valid, and need to be redrafted and replaced. North Carolina courts simply will not allow an employer to impose a blanket prohibition on a former employee going to work for a competitor regardless of the actual competitive circumstances encountered.