Time Limiters in Non-Compete Agreements

September 29, 2017

Topics: Employees as Competitors

Agreements prohibiting employees from working for competitors must include limited time frames.  Most states disfavor agreements which prohibit employees from working.  When considering the validity of non-compete agreements, courts balance the company’s rights to protect its interests against the employee’s right to earn a living.

Non-compete agreements must be narrowly tailored to protect a legitimate business interest, such as the company’s confidential information and important relationships developed over time through effort and expense.  In most cases, restrictions against competing designed merely to limit competition will not be upheld. Free enterprise with a healthy competitive spirit drives our economy.  When a former employee utilizes a former employer’s confidential information and trade secrets, or leverages relationships built during prior employment on the prior employer’s dime, however, such actions are seen as fostering unfair competition, which may be restricted.

It is generally presumed that the value of the information and/or relationships possessed by departing employees decreases over time.  Therefore, extended time periods prohibiting competition are seen to be direct limits on working, rather than necessary restrictions to protect the company’s business information and interests.

A two-year restriction is often seen as the longest reasonable restriction.  However, both longer and shorter restrictions have been upheld and/or required by courts depending on the nature of the situation, the business interest being protected, the ability of the former employee to earn a living, and other factors.

What time frame is considered reasonable also varies depending on the location.  Be sure to consult with an employment lawyer familiar with the law in your jurisdiction regarding enforceability of non-compete agreements.