 By Associate Attorney Ashley N. Bonomini
If you’ve ever signed an employment agreement, it may have included a restrictive covenant. Restrictive covenants can include agreements not to compete with a former employer or business for a certain period of time after leaving a job (a “non-compete”), an agreement not to solicit former customers or current employees of a former employer or business (a “non-solicitation” agreement), or agreements not to use or divulge proprietary or confidential information of a business learned through prior employment (a “confidentiality agreement”). Although non-competes are no longer valid or enforceable in some states, North Carolina still permits reasonable non-compete agreements when they are narrowly drafted and designed to protect a legitimate business interest. In general, a non-compete must be in writing, supported by adequate consideration, and reasonable in its duration, geographic scope, and the activities it restricts. North Carolina law does not establish a specific maximum duration or geographic area for non-competes. Instead, the restriction must be reasonable considering the employer's business and the employee's position on a case-by-case basis. For example, a local business would have difficulty justifying a restriction covering the entire state. Non-competes should be carefully tailored to protect the employer's actual legitimate business interests. Protecting customer relationships, confidential information, trade secrets, and business goodwill can be legitimate interests. However, simply wanting to prevent an employee from working for a competitor isn't enough. Before starting the process to enforce a non-compete clause, an employer should consider whether such actions are worth it. Enforcing a restrictive covenant can be expensive. If an employee leaves and immediately begins working for a competitor, an employer may need to seek a court order to stop the employee from engaging in the restricted activity. The employer is typically responsible for paying its own attorneys fees and costs, so the damage the employee is likely to cause must justify the expense. Employers should also be cautious about assuming that a court will simply rewrite an overly broad provision. North Carolina courts have historically been reluctant to "blue pencil" or rewrite unreasonable restrictive covenants. For that reason, employers should think about enforceability and practicality when drafting the agreement, not only after a dispute arises. Despite their popularity, a non-compete is not always the best way to protect a business. An employer may be better served by a confidentiality agreement or a non-solicitation provision. In many situations, these restrictions may provide adequate protection for the business without significantly limiting an employee's future employment opportunities – making such provisions easier to enforce against a former employee. However, enforcement of a non-compete may be particularly valuable when an employee has significant customer relationships, access to highly sensitive information, or other knowledge that could cause substantial harm if used by a competitor. For example, if your lead software designer leaves your company to work for a direct competitor in the same role, then seeking injunctive relief or enforcing the terms of a non-compete may be necessary to protect a legitimate business interest. A confidentiality agreement or non-solicitation agreement may not be sufficient in this example. Whether you're an employer considering adding a non-compete clause to an employment agreement or an employee who has been asked to sign one, the attorneys at Jesson & Rains, PLLC can help you understand your rights, obligations, and options so you can make an informed decision.
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 By Attorney Kelly Jesson
As you know, we’ve been back and forth numerous times on whether or not business owners in the United States have to file a Beneficial Owner Information Report (BOIR) with FinCen as part of the Corporate Transparency Act (CTA). The Treasury Department finally killed it on Sunday. On March 2, 2025, the U.S. Department of the Treasury announced that it will be issuing a new rule making the BOIR reporting requirements apply to foreign companies only. The Treasury Department also announced that it will not enforce any penalties or fines for failing to file the BOIR pending the implementation of the new rule. We’re pretty confident this signals the death of the BOIR rule. If you have any questions about this, please contact Jesson & Rains for more information.  By Attorney Kelly Jesson
As you all know by now, the Fifth Circuit Court of Appeals enjoined the Corporate Transparency Act (“CTA”) pending oral arguments, scheduled for March 25, 2025. What you may not have known is that there were two federal cases in Texas and one of them went up to the Supreme Court. The Supreme Court overruled the injunction in January, but because there was a nationwide injunction in place for the second case, we still didn’t have to comply with the CTA. On February 17, in light of the Supreme Court’s order, the judge in the second Texas case cancelled the injunction. FinCen has set a deadline of March 21, 2025, for all reporting companies to file their BOIR reports. Oral arguments are scheduled for March 25, after the reporting deadline. Congress has passed a bill extending the compliance deadline to January 1, 2026, and there’s also been legislation introduced to repeal the CTA. FinCen itself has stated that it’s going to change its policies to relieve some burden on small businesses. However, it’s unlikely that any of these will occur prior to March 21, 2025, so we will be working with our clients to get the BOIR reports filed. If you need assistance from us, please let us know.  By Attorney Kelly Jesson
We are writing to clarify the status of the Corporate Transparency Act since there was a lot of activity over the holidays! On December 23, 2024, the Fifth Circuit Court of Appeals granted FinCEN’s emergency motion for a stay of the Texas federal court’s order enjoining the Corporate Transparency Act. Immediately, FinCEN came out with a press release outlining the due dates for Beneficial Owner Report filings. Social media and inboxes were filled with warnings and panic. However, after an emergency rehearing en banc on December 26 (these lawyers and judges took no holiday leave apparently!), the Fifth Circuit again entered an order allowing for the injunction to continue while the case is litigated. What does this mean for you? Until there is an official ruling on the constitutionality of the Corporate Transparency Act, no Beneficial Owner Reports are required to be filed.  By Attorney Kelly Jesson
If you don’t know what The Corporate Transparency Act is, you can read about it here and here. We had been hopeful all year that it would be invalidated, and we had intentionally waited until the end of the year to file the Beneficial Owner Information Reports (“BOIR”) on behalf of our clients. In the past few weeks, we have been working on getting the BOIRs done since the deadline is less than a month away and we were beginning to lose hope. Alas, our prayers were answered yesterday! A federal judge in Texas has issued a preliminary injunction blocking enforcement of the requirement to report the beneficial owners of businesses because the law is “likely unconstitutional.” The order states that companies nationwide do not need to comply with the Jan. 1 reporting deadline unless and until a higher court reverses the order. What does this mean for you? For now, there’s no need to report. But we do need to continue to watch this situation, as the law will surely be litigated in the future. We probably have not heard the last of the Corporate Transparency Act.  By Attorney Kelly Jesson
We previously reported back in April that the Federal Trade Commission (“FTC”) banned non-compete agreements effective September 4. Almost immediately, the rule was challenged in many courts. Earlier this week, a federal judge in Dallas struck down the ban across the entire nation, holding that it was “unreasonably overbroad” and the FTC lacked the authority to enact the rule. Therefore, local business owners can continue to utilize non-compete agreements to protect their proprietary information when an employee with insider knowledge leaves to work elsewhere. However, our courts will not enforce a non-compete agreement that is not narrowly tailored in scope and geographical area to accomplish that goal, so business owners should seek the assistance of an attorney when putting these in place. If you have any questions, or need assistance with an employment agreement, please give Jesson & Rains a call! |
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