Two-Minute Legal Clinic: Non-Competes From a Legal Standpoint

In this Two-Minute Legal Clinic, Scott Levine answers whether non-compete agreements are enforceable from a legal standpoint. His answer is “most likely.”

Like most agreements that attempt to restrain trade, non-competes get a very narrow look from the courts. Courts want to make sure the restriction is truly necessary to fairly protect the interests of the company.

Say you hire an employee and have them sign an agreement that says, “When you leave, you can’t take the customers that you worked with, our prospective customers, our trade secrets, or our employees.” So long as the agreement is narrowly tailored to address those concerns, courts in most states are going to enforce it. Why? Because let’s face it, those are the things that have the most value to an organization, and companies spend a tremendous amount of money to develop them.

Simply having an agreement that says your former employee can’t work for a competitor, without a stated and real need to protect those items, is likely to lead to a court refusing to enforce it. However, if you hire and compensate someone to develop these company assets, courts in most states are going to permit you to take reasonable steps to protect them.

Of course, there are limits to the restrictions you can demand. Those tend to be fact specific. You should definitely consult an advisor before finalizing an employment agreement with restrictive covenants. Courts will look for ways to protect the employee from an overreaching and unnecessary restriction.

Read Scott’s full bio