The Devil is In the Details: The Importance of Sound Non-Compete and Confidentiality Agreements

By:  Autumn L. Gentry Though it may mean a few frantic days and maybe more than one sleepless night, most companies can manage the loss of a key employee relatively well. However, the thought of a key employee going to work for a competitor and calling on the employee’s old contacts to divert business away from the company would have most companies seeing red and staying awake at night. Fortunately, most business owners are savvy enough to have their key employees sign non-compete and confidentiality agreements. Unfortunately these agreements are sometimes unenforceable. Thus, it is critically important to have a well drafted, narrowly tailored agreement. When it comes to enforceability, the question becomes whether the non-compete or confidentiality agreements are sufficient to withstand court scrutiny? The issues outlined below are the ones courts most often look at to determine whether such an agreement is enforceable or not. Is the restriction reasonable? Many companies have the tendency to be heavy-handed in structuring their non-compete provisions; however, it is important to be reasonable. In the non-compete context, reasonableness takes two forms: (1) temporal reasonableness; and (2) geographic reasonableness. Excessive restrictions in a non-compete make it more likely that a judge will not enforce it. For example, attempting to bind someone for more than one or two years after the employee leaves the company may not be enforceable. While a company may reasonably...

Read More