Understanding the Non Compete Laws Kentucky Trusts
After losing scores of valuable employees and trade secrets with them to competitors, a growing number of employers now request or require from their employees agreements under Kentucky noncompete laws. By noncompete agreements or covenants not to compete under Kentucky noncompete laws employees promise not to work for any direct competitor for a specific period of time after leaving the employer. Whether it’s worthwhile for employers to ask employees to sign noncompete agreements and how to create such agreements acceptable to judges under Kentucky noncompete laws are the topics of this article.
How Agreements Under Kentucky Noncompete Laws Protect Businesses
Obviously, agreements under Kentucky noncompete laws can keep businesses losing employees from losing their confidential business information as well . Every business wants to prevent employee with access to sensitive information or trade secrets from disclosing them to competitors.
Trade secrets give business employers competitive advantages because they are not known generally and cannot be acquired readily by others who also could use them advantageously. In form, such confidential information can be in formulas, patterns, compilations, devices, methods, processes, programs, or techniques that businesses reasonably strive to keep confidential and secret.
When an employee with access to the employer’s trade secrets leaves, whether by voluntary resignation or involuntary termination, this information could accompany the former employee at the former employer’s expense. The former employee may start a competing business or go to work for a competitor and divulge the secrets of the former employer’s success. A properly drafted agreement under Kentucky noncompete law can prevent this development so unfortunate for the former employer.
Noncompete agreements are not enforceable in California, where a statute prohibits them except in very limited, rare circumstances in the absence of which judges will not enforce them against former employees. California employers can use nonsolicitation and nondisclosure agreements, however, to safeguard their trade secrets, client lists, and confidential data from divulgence when employees with access to them leave.
Common Sense Considerations
While noncompete agreements protect business trade secrets very effectively, the legal system puts a premium on every person’s right to earn a living. For that reason, a noncompete agreement under judicial scrutiny must overcome some legal hurdles.
Have a Good Business Reason
First, an employer needs a good business reason for asking employees to sign noncompete agreements, which should not penalize employees for merely moving on. Usually, the good business reason will be to protect the employer’s trade secrets or customer base developed by hard work over many years. Selectivity about employees asked to sign noncompete agreements improves prospects for success in court because judges are most likely to enforce them against employees with access to the most sensitive and important inside information.
Employee Benefits as Consideration
Next, the employer must offer a benefit to the employee as consideration in exchange for a promise not to compete. A job offer contingent on acceptance of a noncompete agreement probably meets this condition as the employee receives a benefit in the job offer in exchange for the promise not to compete. For employees hired before implementation of a noncompete agreement policy, promotions or raises in pay can fulfill the condition of a benefit as consideration in exchange for their assents.
Noncompete Agreements Must Be Reasonable
Non compete agreements must be reasonable. They can’t last too long, cover too much geographic area, or prohibit former employees from engaging in too many types of businesses.
Generally, the most frequent issue with non compete agreements is how long they last. Experience suggests a general rule that non competes ranging in duration from six months to two years are presumably reasonable while any longer term encounters more rigorous scrutiny. In contexts other than employment, as with the sale of a business, non compete agreements lasting longer than two years usually are enforceable.
Creating Noncompete Agreements According to Non Compete Laws Kentucky Has Regulated
In drafting non compete agreements, there are a few essential considerations:
- Employers deciding whether to ask for non compete agreements should consider their goals. Is the employee so valuable and has the employer invested so much in training that the employee’s loss to a competitor would damage the employer’s business? Does the employee have access to important information the employer does not want revealed to any competitor? The employer should make sure to present a reasonably valid business purpose for asking an employee to sign a non compete agreement.
- As tempting as a severely restrictive agreement might be, it never pays to overreach; most courts refuse to enforce unreasonable non compete agreements, and their refusals make them not worth the paper that documents them. Instead, employers should try to draft agreements meaningful to them but not punitive to the employee merely for leaving the employer’s business.
Be Sure According to Non compete Laws Kentucky Trusts
While these rules might seem discouragingly difficult, they exist to protect employees from unscrupulous employers. As long employers are reasonable, the law will support them. To be safe and sure, consult a skilled, experienced litigation, business, and employment attorney for assistance with legal issues involving contracts, employment, insurance, leases, litigation, leases, or insurance under the non compete laws Kentucky has set forth. There is no substitute for professional legal assistance. At the Patricia A. Abell Law Office, we understand the non compete laws Kentucky has created. Call us at 502.561.3455.