A Recipe to Beat Your Statewide Non-Compete

Most employers overreach: They don’t want competitors, period. So, when given a chance to draft a non-compete, they want it to be as broad as possible. So, when an employer has an employee who works in South Carolina and North Carolina, the non-compete generally will prohibit the employee from working anywhere in one of those two states. However, what if the employe only worked in 16 of South Carolina’s 46 counties? What if the employee only worked in 3 of North Carolina’s 100 counties? Actually, I have this case; let’s look at South Carolina law from my legal brief on this question.

First statement of law: “To be considered reasonable, a territorial restriction must not cover an area any broader than is necessary to protect the employer’s legitimate interest.” Stringer v. Herron, 309 S.C. 529, 424 S.E.2d 547 (Ct. App. 1992). So what does this mean in regards to statewide prohibitions? In a case in which the employee’s dealings with occurred in only two counties, the South Carolina Supreme Court held that a statewide prohibition was overly broad. Oxman v. Sherman, 239 S.C. 218, 122 S.E.2d 559 (1961)(citations omitted). Here is the magic language: “Any covenant should have been limited to the area where he worked. Extending it to the entire State rendered it unenforceable.” Id. (emphasis added).

In another case, Rental Uniform Serv. v. Dudley, 278 S.C. 674, 301 S.E.2d 142 (1983) the court stated it this way: “A geographic restriction is generally reasonable if the area covered by the restraint is limited to the territory in which the employee was able, during the term of his employment, to establish contact with his employer’s customers.”

So, whether you are talking about 2 of 46 counties or 16 of 46 counties, a geographical restriction that covers counties in which you did not work, in which you did not have an opportunity to establish contact with your employer’s customers, is inherently suspect, if not downright unenforceable. Of course, there are arguments for specific instances: Sales manager who manages sales force that establishes contact in each county is one that comes to mind. So, nothing in law is simple, but most successful legal arguments begins with a simple statement of the law. The Supreme Court has provided a couple of simple statements, which if the Supreme Court actually means what is says, provides a recipe for beating a statewide noncompete.

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