Is a 10-yr & 100-mile radius of co borders unreasonable?

Insurance company contracted with me and paid me with a 1099 as an "independent contractor" but always provided office space, office equipment, local telephone service, told us how much insurance to sell and also required us to attend meetings, dress a certain way and be in the office at certain times.

All agents had to sign contracts which contained a clause that stated the company (upon your vested termination after 5-years) would buy out the agent's book of business/policies and that the agent would receive those buy-out payments over a 120-month period provided that the agent does not "sell directly or indirectly any insurance for any company in NC within 100-mile radius of the county borders".

If this is in-fact enforceable, it is basically saying that I won't be paid for that book of business that the company "bought" when I left... even if I sell insurance products that my old company brokered through other companies or products that we didn't even sell at all.

Is this considered a type of "non-compete" and is it enforceable given the 10-yr time frame and 100-mile county border radius? Thanks for your time.

1 answer  |  asked Aug 19, 2009 08:19 AM [EST]  |  applies to North Carolina

Answers (1)

Reagan Weaver
This is an interesting question that prompts a question. Were you actually an employee? Or, were you, indeed, an independent contractor who signed a covenant at the time you were first 'employed.' The courts may give more leniency in NC to a restraint on trade that is part of a sale of business, but does this count as a restraint of that type or is this just a simple attempt to prohibit competition by a former employee?

NC courts are fond of saying that restraints on competition are frowned upon; however, that does not mean that you could necessarily win.

Your contract language needs to be evaluated very closely, and the circumstances around your signing of the agreement should also be examined. Ten years is a very long time and strikes me as too long. The 100-mile radius is not immediatly objectionable to me. The ten years period is most troubling.

I would recommend that you seek further advice if you want to challenge the restraint.

posted by Reagan Weaver  |  Aug 25, 2009 10:23 AM [EST]

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