When Non-Compete Agreements Fail: Critical Lessons from a Recent North Carolina Business Court Decision

A decision in the North Carolina Business Court, Accelerando, Inc. v. Relentless Solutions, Inc., offers valuable insights for employers drafting restrictive covenants and businesses facing employee competition disputes. The North Carolina Business Court’s June 2025 decision demonstrates how poorly drafted non-compete agreements can fail entirely, while confidentiality provisions and tortious interference claims may still provide meaningful protection.

When Non-Compete Agreements Fail

The Case Background

The former Vice President of Platform Services at Accelerando, Yoder, left to join competitor Relentless Solutions after 13 years of employment. Before departing, Yoder allegedly forwarded confidential customer information to his personal email and subsequently helped Relentless secure several of Accelerando's former clients. Accelerando sued for breach of restrictive covenants, tortious interference with contract, and other claims.

Non-Compete Provision: A Textbook Example of Overbreadth

The court struck down Accelerando's non-compete provision as "unreasonably overbroad and unenforceable as a matter of law." The problematic language prohibited Yoder from "directly or indirectly" providing services to any of the Company's customers, clients, or accounts that might be considered competitive in nature for 24 months.

Fatal Flaws in the Non-Compete Language

Employers must be aware of the fact that an overbroad non-compete is more useless than a narrowly tailored one. North Carolina courts reject non-competes on a variety of grounds, including the following, which were specifically referenced by the court.

1. "Directly or Indirectly" Prohibition. North Carolina courts consistently reject non-compete clauses using "directly or indirectly" language as impermissibly broad. This phrasing creates uncertainty about what conduct is actually prohibited and extends the restriction beyond reasonable limits.

2. Undefined "Services" and "Competitive in Nature." The agreement failed to define what "services" were prohibited or specify who determines what services "might be considered competitive in nature." This vague language left Yoder without adequate notice of prohibited conduct.

3. Temporal Ambiguity Regarding Customer Base. The provision was unclear whether it applied to all customers who had ever worked with Accelerando, those active during Yoder's employment, or future customers acquired after his departure. This temporal uncertainty rendered the restriction unenforceable.

4. No Geographic Limitation. The complete absence of geographic restrictions created an essentially worldwide prohibition, far exceeding reasonable territorial limits.

Some Practical Guidance for Drafting Enforceable Non-Compete Agreements

To ensure enforceability, non-compete agreements must be in writing, reasonable as to time and territory, part of the employment contract, based on valuable consideration, and designed to protect legitimate business interests. Some of the best practices for drafting a non-compete in North Carolina are as follows. These are lessons that have been learned the hard way by employers who litigated these issues, and there is no reason to repeat someone else’s mistakes.

• Use Precise Language: Avoid "directly or indirectly" formulations. Instead, specify exact prohibited activities and define key terms clearly.

• Geographic Limitations: Include reasonable territorial restrictions tied to the employer's actual business operations or the employee's work area.

• Customer Definitions: Clearly define which customers are covered (e.g., "customers with whom Employee had material contact during the final two years of employment").

• Service Specifications: Precisely describe prohibited services rather than using broad, undefined terms.

Confidentiality Provisions: A More Reliable Protection

While the non-compete provision failed, the confidentiality provision survived the motion to dismiss. The court found sufficient allegations that Yoder breached his duty not to disclose confidential customer information for seven years post-employment. Confidentiality agreements are not scrutinized as closely by courts as non-competes, and like many, this one was upheld.

Key Takeaway

Even when non-compete provisions fail, well-drafted confidentiality agreements can provide meaningful protection against misuse of proprietary information.

Strategic Implications for Businesses

For employers, it is vital to take several steps to ensure their agreements are enforceable. Existing agreements should be reviewed and audited to confirm that the current permissible language is used, rather than overbroad language that could render them unenforceable. Confidentiality agreements (non-disclosure agreements) are vital, and robust agreements in this case may provide better protection than broad non-compete restrictions. Furthermore, employers should document customer relationships by maintaining clear records of which employees worked with specific customers to support future enforcement actions.

Conclusion

The Accelerando decision reinforces fundamental principles governing restrictive covenants in North Carolina. While the court struck down an overbroad non-compete provision, it preserved claims based on confidentiality breaches and improper customer solicitation. For businesses seeking to protect their interests, the lesson is clear: precise, narrowly tailored agreements focusing on legitimate business interests provide far better protection than broad, vague restrictions that courts will refuse to enforce. When competition crosses into unlawful territory through the misuse of confidential information, tortious interference claims remain a viable remedy even when non-compete provisions fail.

This analysis is based on Accelerando v. Relentless, 2025 NCBC 29 (N.C. Super. Ct. June 19, 2025).

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Dye Culik is a North Carolina-based business law firm handling matters throughout North and South Carolina. We represent businesses in a variety of matters, including management-side employment law and restrictive covenants like non-compete agreements, non-solicitation agreements, and non-disclosure agreements. Connect with us and mention this article for a complimentary consultation.