Noncompete agreements are contracts entered into by employers and employees. They place limits on where an employee can seek work if they decide to no longer work for the employer and how long these restrictions will last. For example, a noncompete may say the employee cannot work for a competitor or cannot work within a certain geographical area for two years.
Noncompete agreements are meant to protect an employer’s interests, such as their trade secrets, training and client base without being too restrictive on employees. However, there are some reasons a noncompete agreement could be found to be unenforceable in court.
The restrictions are unreasonable
One way a noncompete could be found to be unenforceable in court is if it is overbroad. This means the judge will deem it to be unreasonable in its restrictions. These could be restrictions on time, geographical area or activities.
Breach of contract
Noncompete agreements are contracts and like any other contract they could be breached leading to a lawsuit. For example, an employer could fail to meet their obligations regarding the employee leaving the company, either explicitly or implicitly. The breach must be material to have a judge determine the entire contract including any noncompete provisions is unenforceable.
There is no legitimate business interest
If an employee challenges a noncompete in court, they may argue the employer has no legitimate business interest that needs to be protected. Some examples of legitimate business interests include trade secrets, confidential business information, client bases, goodwill related to the ongoing operations of the business and specific training processes. If any purported business interests are available to the public in general, a judge may find the noncompete is unenforceable.
These are only three reasons why a noncompete could be challenged in court. Ultimately, it is essential that employers and employees review any noncompete agreements carefully. Doing so can help avoid the need for litigation down the road.