Non-compete Law

C ovenants 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 reasonably 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 enforceability 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.

Courts generally view restrictive covenants with disfavor, critically examine them, and construe them against the employer if determined to be overly broad, so employers must carefully draft and review these agreements.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. I can assist you with all four types of 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.

Most states that enforce non-compete agreements have formed a “reasonableness test.” 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.

Employers often substitute covenants not to solicit customers or clients—who were customers or clients at the time of termination or during a stated period before termination—for traditional covenants 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.

Employers will generally want to prevent departing employees to solicit away other key employees of the company. Therefore, employers frequently include a covenant not to solicit employees—effective for a reasonable period, typically 1 to 2 years after departure—in their written agreements with employees.