Updated on November 8th, 2022
A South Carolina non-compete agreement is a contract whereby an employer prohibits an employee from engaging in competitive business activity after the employment relationship ends. Non-compete agreements impose time and geographical restrictions in which the former employee cannot work for competing companies, start a similar business, or communicate with their ex-employer’s customers, clients, and current employees.
For the agreement to be upheld in court, it must be clear that the restrictions are necessary to protect the employer’s interests. It is unlikely that the contract will be enforced if it is excessive in length or geographical limitation.
Whether a non-compete agreement is enforceable depends highly on the reasonableness of the restrictions and the factors leading to a breach of contract. Since South Carolina has no statutes governing the use and enforcement of non-competes, the courts will reference previous cases to determine the agreement’s enforceability.
A non-compete agreement will be upheld in a South Carolina court if the following applies to its restrictive covenants:
- They are essential to safeguard the employer’s legitimate interests.
- They are reasonable with respect to time and location.
- They are not unnecessarily severe and oppressive in limiting the employee’s honest attempts to make a living.
- They are not in violation of public policy.
- They are backed by valuable consideration.
A non-compete agreement cannot be enforced against a lawyer if it restricts their right to practice law following termination, or if the restrictions are imposed against a lawyer to settle a client controversy.
Although the maximum duration is not set by state statute, the restrictive period should not exceed the length of time needed to reasonably protect the employer’s interests. The courts previously upheld a three (3) year non-compete agreement as well as a five (5) year restriction following the sale of a restaurant. However, it is unlikely that a non-compete with an indefinite duration will be enforced.
Geographical restrictions are not defined by law; however, the area in which the employee cannot compete must be reasonable and no larger than what is required to afford adequate protection for the employer. The allowable non-compete area will vary depending on the nature of the employer’s business. For reference, a non-compete with a 15-mile geographical restriction was deemed unenforceable, while the courts approved a 150-mile restriction in another case.
An employee must receive consideration for agreeing to the employer’s non-compete restrictions, such as an updated at-will employment contract with increased pay. Unlike some states, continued at-will employment is not sufficient consideration in South Carolina.
- Oxman v. Sherman, 239 S.C. 218, 222-26, 122 S.E.2d 559, 561-62 (1961)
- Rules of Prof. Conduct, Rule 5.6
- Faces Boutique, Ltd. v. Gibbs, 318 S.C. 39, 40-44, 455 S.E.2d 707, 708-09 (Ct. App. 1995)
- Rental Uniform Service of Florence, Inc. v. Dudley, 278 S.C. 674, 676, 301 S.E.2d 142, 143 (S.C. 1983)
- Cafe Assocs., Ltd. v. Gerngross, 305 S.C. 6, 8-10, 406 S.E.2d 162, 164-65 (1991)
- Sermons v. Caine & Estes Ins. Agency, Inc., 275 S.C. 506, 507-09, 273 S.E.2d 338, 339 (1980)
- Stringer v. Herron, 309 S.C. 529, 530-32, 424 S.E.2d 547, 548 (Ct. App. 1992)
- Palmetto Mortuary Transp., Inc. v. Knight Sys., Inc., 424 S.C. 444, 455-59, 818 S.E.2d 724, 731-32 (2018)
- Riedman Corp. v. Jarosh, 290 S.C. 252, 253, 349 S.E.2d 404, 405 (1986)
- Poole v. Incentives Unlimited, Inc., 345 S.C. 378, 381-83, 548 S.E.2d 207, 209 (2001)
- Team IA, Inc. v. Lucas, 395 S.C. 237, 245-46, 717 S.E.2d 103, 107 (Ct. App. 2011)
South Carolina Non-Disclosure Agreement – A legal contract used to ensure that private information remains protected from the hands of unauthorized parties.
South Carolina Non-Solicitation Agreement – Creates protective measures against an employee directly or indirectly engaging with their former employers employees and customers.