Restrictive Covenants: Non-Competes

May 17, 2023

Non-competes have been a hot topic of late with the FTC and President Biden taking a hard line to try and significantly limit and/or eliminate their usage They apply to employees and/or formers owners of a business.  For today’s purposes, we will be focusing on non-competes for employees.  Below are some of the key considerations when drafting a reasonable and enforceable non-compete:
What does it prevent a former employee from doing?

  • Taking and using company trade secrets & confidential information
  • Taking company clients, both existing or prospective
  • Using any specialized training provided by their former employer to compete

What are the typical restrictions on the former employee?

  • The former employee cannot go to a competitor company
  • The former employee cannot start a competitor company that offers the same products or services
  • The former employee cannot recruit former colleagues to join the competitor business

Is it enforceable (i.e, what do Courts look at)?

  • Does it protect your legitimate businesses interest?
  • Is the time restriction reasonable?
  • Is the geographic restriction reasonable?
  • Was the employee provided some type of consideration in exchange for the non-compete?

The above items are high level points that should be considered when implementing non-compete agreements with your employees.  However, remember there is a very real movement at both the State and Federal level to significantly limit their application.  If you have questions about their viability and/or enforceability, please make sure you consult with your professional business advisors.
Below are some good articles that can provide more insight: