Louisville Non-Compete Agreement Lawyer Offers Advice
A non-compete agreement is a written contract between an employer and employee that contains binding and often restricting terms and conditions about the employee’s ability to work in the same industry or with competing organizations upon employment termination. A Louisville non-compete Agreement lawyer can help you understand what the agreement entails or what needs to be in the contract, if you’re an employer.
A fundamental requirement of a non-compete agreement is that the business being protected by the agreement possess something unique that gives it a competitive advantage. A second important requirement is that the non-compete agreement be limited in time, scope and duration.
The agreement could state that the employee cannot work for competing businesses within a specified geographical radius for a certain duration following termination of employment. The agreement could also contain non-solicitation clauses that prevent the employee from recruiting other employees or communicating with clients or potential clients.
In exchange, the employee receives something of value, called “consideration,” from the employer.
What Requirements Are Needed To Be Valid?
The non-compete agreement must:
- Have sufficient and valid consideration at the time of signing. Consideration could be new employment, a raise, a promotion, or some other benefit of value. In a recent landmark decision, the Kentucky Supreme Court held that continued employment alone is insufficient consideration. Creech, Inc. v. Brown, 433 S.W.3d 345 (2014). Thus, any non-compete agreement signed after employment began should be scrutinized to determine whether anything else of value was given to the employee (e.g. a raise) aside from just retention of the employee’s employment.
- Protect a legitimate business interest.The goodwill developed by an employer towards relationships with customers or investors are assets that can be protected by a non-compete agreement to prevent a former employee from taking advantage of that goodwill and competing with the employer. A non-disclosure clause in the non-compete agreement protects confidential or proprietary information and trade secrets if the employer shows that it took reasonable measures to keep the information secret and that information gives the employer a competitive advantage.
- Be reasonable in duration, scope and geography. The reasonableness of the duration and scope of the non-compete agreement will depend on the specific facts of each case. For example, if the non-compete agreement is designed to protect confidential information, then the duration can be no longer than the time for which the information has value.
The reasonableness of the geographical area will depend upon the services provided by the employee and the importance of the services to the employer’s business. Thus, courts will not permit non-competition agreement to prevent an employee from working in a geographical area where the employer does not do business.
Are Non-Compete Agreements Enforceable?
Kentucky courts established two “guiding principles” governing non-compete agreements to determine whether the agreement is enforceable:
- Non-compete agreements must sufficiently protect the legitimate business interests of the employer while neither interfering with the public interest nor placing undue hardship on the employee; and,
- Trial courts can modify unreasonable provisions so that the agreement is not rendered unenforceable.
Non-compete agreements are more enforceable if they are:
- Not too restrictive in duration and geography;
- Cover integral components of the actual job description and responsibilities; and
- Tied directly to the possession of confidential and proprietary information, which if revealed, could seriously damage the employer’s business interest.
Non-compete agreements can be modified or rendered void if they are:
- Unlimited in scope, duration, and/or geography;
- Unrelated to the employee’s duties;
- Place significant hardship on the employee, making it difficult for the employee to earn a living in his or her chosen career or profession; or,
- Against public interest.
Finding an Attorney
As an experienced Louisville non-compete agreement lawyer, I can answer your questions and concerns regarding non-compete agreements. Call (502) 561-3455 or complete the form on this website.