Non-Compete Agreements

The Basics of Non-Compete Agreements

Are non-compete agreements enforceable? If a competitor engages in employee raiding, will non-compete agreements protect you? This article by attorney Jim Komie of Schuyler, Roche & Zwirner, P.C. sets forth the basics on non-competes.

A non-compete is a contract provision that restricts the post-employment activity of an employee by limiting his/her ability to compete with the employer.
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Some provisions actually prohibit the employee from working in a similar line of business for a period of time within a specified geographic region. Other provisions prohibit the employee from soliciting the employer's customers or employees for a period of time.

The most basic provisions simply prohibit the employee from disclosing or using the employer's confidential business information, such as customer lists.

Many business owners assume that courts treat non-competes like regular contracts and will enforce them to the letter. Other business owners have heard the opposite -- namely, a horror story of an employer who filed suit against an ex-employee only to learn (after thousands of dollars in attorneys' fees) that its non-compete was not enforceable.

The truth lies somewhere in the middle. Most courts will not prevent an ex-employee from contacting customers or working for a competitor simply because his employment contract says that he cannot do so. Standing alone, the contract is not enough. Courts also typically require that the employer have a "protectable interest" in the information or customers that are covered by the non-compete.

Non-disclosure of confidential information clauses are the easiest to enforce. Courts almost always find that an employer has the right to protect its confidential business information.

Covenants barring the employee from working in the industry for a period of time are the most difficult to enforce. Courts dislike such covenants because of their significant effect on free competition. Provisions that prohibit the employee from soliciting clients or employees fall somewhere in between.

Article provided by attorney Jim Komie of Schuyler, Roche & Zwirner, P.C. Jim has a wide variety of experience in commercial litigation, with an emphasis on employment litigation and counseling. Jim can be reached at 312 565.8352 or via e-mail at jkomie@srzlaw.com.

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