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What Is The Scope Of Your Non-Compete?

Posted by Attorney Stephen Hance | Mar 29, 2013 | 0 Comments

If your business relies on non-compete agreements to help stay competitive then it is critical that those agreements are drafted narrowly enough to be enforceable without giving away a business advantage. Good counsel will give your business a good agreement and at the end of the day that can mean the difference between staying competitive and losing ground.

First, non-competes must be reasonable in both duration and geographical scope. Except in situations involving a sale of a business, non-compete restrictions of more than one year in duration may not be enforced. In some lines of business six months may be more appropriate. Further, it is not unusual to set different durations for different types of restrictive covenants. For example, an agreement may provide that non-compete restrictions continue for six months while the covenant not to solicit customers continues for one year and the covenant not to disclose confidential information continues indefinitely. Reasonableness in duration will be a factually-specific determination driven by the specific needs of your business.

Second, the appropriate geographical scope for a non-compete usually depends on the nature and scope of the employer's business and the protectable interest(s) at stake. Where good will is the only business interest involved and the employee's customer contact is limited to a particular region, the non-compete should be limited to that region. Where confidential business information is the business interest (and a covenant not to disclose may not provide adequate protection), it may be appropriate for the non-compete to have no geographical limitations.

Because the scope and types of restrictive covenants that are appropriate typically vary from position to position, it is often not possible to have a one-size-fits-all agreement for all employees to sign. Moreover, courts may be more inclined to enforce a non-compete that is specific to a particular employee, as opposed to a fill-in-the blank agreement.

About the Author

Attorney Stephen Hance

Steve represents and advises clients that are dealing with business and real estate disputes. Steve is an investor and business owner, and his approach is unique from other attorneys.

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