Covenanants not to compete (also referred to as "non-compete agreements" are generally enforceable against an employee. However, they generally will not be if the prohibitions are more broad than are reasonbaly necessary to protect an employer's interest. The numerous traps for drafting an enforceable covenant not to compete or non-compete agreement are numerous and subtle. The rules governing their enforceablity also greatly vary from state to state. Contact a lawyer with our law firm to assist you in drafting or reviewing any such agreement in accordance with the laws of the applicable state.
Because restrictive covenants are “generally looked up with disfavor, critically examined and construed against the employer,” they must be carefully drafted and reviewed. However, courts in most jurisdictions recognize the freedom of an employer and employee to enter into such covenants when reasonable and consistent with the interest of the public. An attorney with our firm can assist you with all four types of such covenants: (1) traditional covenants not to complete, (2) covenants not to solicit customers, (3) covenants not to solicit employees, and (4) covenants not to disclose trade secrets and/or confidential information.
The Traditional Covenant Not to Compete
Most states that enforce non-compete agreements have formed a "reasonableness test," which are general guidelines for determining whether such a covenant is reasonable or not. Under a “reasonableness test,” a covenant not to compete will be generally enforced if it can be shown that the covenant (1) is necessary for the protection of the legitimate interests of the employer, (2) is reasonably limited with respect to time and place, (3) is not unduly harsh and oppressive in curtailing the legitimate efforts of the employee to earn a livelihood, (4) is supported by valuable consideration, and (5) is reasonable from the standpoint of sound public policy. The actual factors vary state by state.
Covenants Not to Solicit Customers or Clients
A Covenants not to solicit customers or clients who are customers or clients at the time of, and/or for a stated period before, the termination of an employer-employee relationship is often substituted for a covenant not to compete. Such a covenant may be more appropriate than the traditional covenant not to compete, when, for example, the employee dealt with national accounts or where the employer has substantial investment in or revenue from then current customers or clients. Unlike traditional covenants not to complete, there is no geographic limitation on such covenants. However, some cases in some jurisdictions imply that employee only can be restrained from contacting customers or clients he or she had prior contact with.
Covenants Not to Solicit Employees
Employers will generally want to prevent departing employees to solicit away other key employees of the company. Therefore, a covenant not to solicit employees for a reasonable time after their departure, generally 1 to 2 years or less, is frequently included in every employer's written agreement with employees.
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