When helping clients grow their business, one of the questions that always seems to come up is whether the business needs to have a "non-compete" provision in their employment agreements with the employees. If you read the news, the common stories these days are of employees suing their old companies to invalidate the non-compete agreements.
Employees who have left the company will often argue that the non-compete provisions are too broad and that their new employment does not compete with their old employer. The facts of each case are different, but if you end up in front of a judge, it will be a factual analysis to see if the employee's new position is in competition with your business.
The enforceability of a non-compete agreement is usually created by state law, but there are a variety of strategies that seem to apply across the board when drafting a non-compete:
- Examine the employment agreement generally to ensure that it is enforceable - a court likely will not enforce a non-compete that is contained in a generally unenforceable agreement.
- Make sure the non-compete is not too "broad" and is limited in time, geographic and activity scope.
As a general rule, courts tend to disfavor non-compete agreements that are poorly drafted and would inhibit the employee from finding gainful employment elsewhere. So if you truly need to protect your business' intellectual property, it would be wise to consult with an attorney to ensure that any non-compete provisions in your contracts are properly drafted and would be enforceable in the state that governs your contract.