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Protecting Goodwill, Trade Secrets, and Confidential Information with Non-Compete Agreements

Written by: Russell Beck

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Posted over 3 years ago. 4 helpful votes, 0 comments

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Make The Non-Compete Reasonable

Reasonableness is typically the touchstone of the analysis and is highly fact-dependent. The context in which the non-compete arises (e.g., employment relationship, contractual relationship, etc.) is a critical factor in the analysis. Although a non-compete that is unreasonably broad will in many states be scaled back if it is in fact capable of being narrowed, other states will simply reject it. Even in states that will narrow a non-compete, different states take different approaches, and most courts will not narrow a non-compete that is thereby rendered vague.

Don’t Over-Reach

Non-competes generally must be limited in duration, geographic reach, and scope. Even then, however, they will be enforced “only to the extent . . . necessary to protect the legitimate business interests of the employer" or they will be outright rejected, depending upon the state. Because enforcement of a non-compete lies within a court's equitable powers, it is best to draft the non-compete narrowly and properly, lest a court view the non-compete as over-reaching, and therefore not enforceable as a matter of equity.

Make Sure Consideration Has Been Exchanged

A non-compete, like other contracts, must be supported by consideration. A lack of consideration will make the non-compete unenforceable. What will constitute appropriate consideration varies by state.

Additional Resources

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