What Factors Bear Upon the Enforceability of Noncompete Agreements?
For businesses, non-compete agreements can be an important way to protect their interests in work product, resources and other knowledge to which employees become privy in the course of their employment. Non-compete agreements, though, are only effective when they are properly drafted, and it is important for businesses to have a strong grasp of the requirements for a valid agreement and to make sure they implement processes to ensure the validity of any agreements the negotiate with employees.
The basic requirement with any noncompete agreement is that it must be reasonable and not overly burdensome on the employee. What exactly this means depends on various factors. Several of these factors have to do with the parties to the agreement and the relationship between them. These are: the nature of the employer’s industry; the relevant characteristics of the employer within that industry; and the history of the employer’s relationship with the employee.
In considering the reasonableness of a noncompete agreement via these factors, courts will consider, among other things, how important non-competes are to the employer’s industry, the geographical scope of the agreement, when the agreement was entered into and how much training the employee received from the employer.
Reasonableness being a fluid factor, there are no hard and fast rules regarding when an agreement is enforceable with respect to these factors and when it is not. Businesses making use of these agreements simply have to be as informed as they can about the law and act prudently in negotiating reasonable noncompete agreements.