A non-compete contract is an agreement that an employer asks an employee to sign. It generally establishes both that the worker will not engage in competition with them during the course of their employment as well as after they leave their employment. The terms of these contracts can vary substantially, and these variations and their reasonableness are often what determine the enforceability of the contract itself.
One of the factors considered most important in determining whether the terms of a non-compete agreement are reasonable is the length of time that the contract restricts the employee. From the employer’s perspective, the longer the prohibition against working for a competitor the better, as the more protection the agreement provides to them. But from the perspective of the employee, the longer the time period, which is written into the contract, the more it will restrict their ability to work, particularly if the time limits are combined with other limitations (such as geography or industry) within the contract. A non-compete contract is only considered well-crafted if it can be enforced. In order for that to happen, it must be considered to have given weight to the interests of each of these two parties and land in a place that is considered reasonable. In most cases, a reasonable duration of restriction is between six months and two years.
There is a considerable difference between a six-month period of time and two years, and the reasonableness of each depends upon the specific circumstances of employment. Determinative factors may include whether the employee is in possession of trade secrets; whether they had strong relationships with the employer’s clients; and the amount of time and resources that were invested in training the employee. Though an employer may be rightly concerned about the advantage their former employee may provide to a competitor who hires them and want to put that eventuality off for as long as possible, it is important to be mindful of the fact that long-term duration of a non-compete agreement is likely to result in it being viewed as unenforceable.
If you are looking for help in creating a non-compete agreement that you can rely upon to protect the interests of your business, our experienced attorneys can help. For more information, contact us today to set up a time for a consultation.