The $24.2 billion United States fitness industry includes 36,180 gyms and 279, 100 personal trainers. No one thinks of a "bad breakup" between the trainer and the gym at the start of the working relationship, but it can and does happen. A gym in New York sued three former trainers for $40M when they opened a competing gym in the area. Gyms have added non-compete provisions along with nonsolicitation clauses and codes of conduct into employment contracts in order to prevent trainers from leaving their facilities with clients in tow. Eager, young trainers and experienced trainers have likely signed them without pause. However, just because a provision was included doesn't automatically mean it will be valid or binding. In order to prepare both sides for signing and having a non-compete agreement, this article will discuss what provisions non-compete agreements should include, how courts interpret them, and consequences of breaking a valid agreement and the ethical concerns that come with it.

The Basics

Non-compete agreements are stand-alone contracts or are found as clauses within an employment contract where one party agrees not to compete against the other for a specified period of time. Also known as covenants not to compete, these agreements can also restrict the employee or independent contractor (the trainer) from working for a competitor or starting a competing business. The employer (the business) uses these agreements to protect clientele lists, trade secrets, and business the employee learned during his tenure with the company.

It is important to note that non-compete agreements can also be used when one business buys out another business. For example, if Giant Gym is buying Globo Gym, then Giant Gym may require Globo Gym to sign a non-compete agreement saying they would not open another gym within that area for a definite amount of time.

Below is a general list of information required for a non-compete agreement:

• Names and addresses of both parties involved (the gym and the trainer regardless of his or her status as an employee or independent contractor)
• Effective date for when the provisions apply
• Duration of the agreement
• Geographic restrictions
• List of services or duties required by the trainer in detail and what competing businesses would be. Note some courts have found a strength and conditioning coach would not be in breach if he worked teaching yoga at a yoga studio.
• Consideration: this could be in the form of payment (lump sum, bonuses, etc.), stocks, health insurance, or anything deemed above and beyond what a typical employee or contractor would receive otherwise.  Note that some courts have found that even if an employee didn't have any of the above consideration, if they worked for a company for 15 to 24 months, then the non-compete could still be considered valid and enforceable. Working for a company for that extended amount of time could be categorized as consideration in some jurisdictions.

Below is an optional list of information commonly found alongside non-compete agreements. Some businesses use them in the event the non-compete is deemed unenforceable then they will have another avenue to potentially protect their business.

• Non-solicitation clauses: the trainer is prohibited from soliciting, or taking, clients from the business or training them off-site while still employed by the gym. These clauses can also be used to prohibit a trainer from soliciting current trainers and staff of the gym to leave and start a competing gym. The effectiveness of these clauses will be discussed further in the next section.
• Non-disclosure clauses: a trainer can be prohibited from disclosing or using confidential information like client lists, gym trade secrets, or anything deemed not to be common knowledge.

Court Interpretation Factors

In order to be valid, the agreement must be reasonable (in scope and location), cannot be adverse to public policy, and must protect a legitimate business interest. If the agreement is alleged to have been breached and a suit is filed, then these factors will be interpreted by the court. When creating or signing a non-compete agreement, it is important to keep these factors in mind.

• Reasonableness: In order for a non-compete to be valid, courts have ruled that the provisions must be reasonable. Typically courts have interpreted this to mean the restriction to be employed by a competitor must for a reasonable length of time. Fewer than six months and up to two years is typically deemed reasonable, but five years may not be for the fitness industry. Another consideration is the location restriction. A non-compete saying a trainer cannot work for any other company in the United States will be too broad and likely unreasonable. Courts have held that a state, specific zip code, or within a certain distance (5-20 miles) or radius from a named city are typically reasonable.
• Public Policy: Courts are adamant that non-competes cannot interfere with a person's (reasonable) ability to make a living or create a monopoly. North Dakota, Colorado, and California reject non-compete agreements for this very reason (except for business to business transactions in California). If you are an independent contractor and cannot live off training clients at one facility, then signing a non-compete agreement would not be in your personal best interest. However, your status as an "independent" contractor would make that provision invalid and likely not enforceable. Note that even if you are hired as an independent contractor, some courts may look at your actual relationship with the gym and determine you were actually an employee. If that is the case, then the non-compete would likely be valid and in line with public policy. 
• Legitimate Business Interest: The gym must have a valid interest, or reason, for the restrictions.  Valid interests have been found to include protecting client lists and trade secrets. Other valid interests occur when the company pays for the employee's certifications or continuing education. A New York gym sued three former trainers for $40M when they opened a competing gym using trade secrets and client lists.

Consequences Of Breaking A Non-Compete Agreement

If the court finds the non-compete agreement was valid and was breached, then the trainer could face a multitude of consequences both legally and professionally.

The most common legal consequences are monetary damages and injunctive relief. If the trainer is held liable for monetary damages he may, for example, be forced to pay the gym lost profits or revenue as a result of his actions. Should the court find he acted maliciously, punitive damages could also be awarded to the gym as well. If applicable, the trainer may have to pay court costs and attorneys fees for the gym as well. Second, the trainer may be restricted from employment or forced to leave their current, competing employer (injunctive relief).

That said, the most damaging consequence of breaching the non-compete agreement is the erosion of the trainer's reputation in the community. It is understandable that it may take some trainers longer than others to find a compatible gym, but the trainers who routinely gym hop and take clients with them may soon find themselves outcasts within their industry. Eventually, they will be hard pressed to find a gym to hire them considering their history of stealing clients. Remember, taking clients isn't just taking business away from a gym: it's also taking away respect. Conversely, a gym that is lawsuit happy or continuously bad mouths past trainers may end up being hard-pressed to find trainers sign on with them.

It's common for there to be some turnover in clients if a trainer leaves to train elsewhere or start his own gym. Gym owners can protect themselves from a mass exodus by ensuring buyout clauses (also known as early termination fees) are drafted into their contracts with members. Gyms can also vary coach and trainer schedules. For example, John teaches a busy Monday 5:30 am class, but every two weeks, Susan will teach it, and John teaches an evening class instead. If a gym has a professional and solid training staff, then there shouldn't be too much turn over if a trainer breaches a non-compete agreement.

Conclusion

Before creating or signing a non-compete agreement, make sure you have read it thoroughly. Ensure the trainer duties are specified and effective dates are listed. Do not be afraid to negotiate with the potential employer or employee if necessary. Save yourself the headache and money by hashing things out at the beginning of your relationship rather than in court. The damages to both of your reputations as a result cannot be undone.