non compete covenants
In the employment context, a non-compete covenant (or clause) is an agreement made between an employer and employee in which the employee agrees to refrain from competing with his or her employer. Generally speaking, these covenants are only enforceable when they are limited in geographic scope and in duration. For example, the covenant must only last for a limited amount of time (e.g., three months, one year) and only apply to a specific geographic area (e.g., New York City, tri-State Area).
Each State has developed its own standards for enforcing these covenants, so it is important to understand your particular state law in this area.
Terms of a Non-Compete Covenant
When included within an employment contract, the noncompete clause should contain certain basic elements:
- The duration of the covenant;
- The geographic scope of the covenant;
- The ability of the court to redraft the covenant in order to make it enforceable within the applicable jurisdiction;
- If required, the consideration offered for the covenant;
- A statement that the covenant is necessary to protect the employer is legitimate business interest;
- That the employer will suffer irreparable damage as a result of the competitive behavior;
- That the employer is entitled to injunctive or other equitable relief in order to protect its legitimate business interest;
- The employee’s understanding that the restriction is reasonable;
- The trigger for the covenant;
- Whether termination without cause is an exception to enforcement of the covenant;
- That the covenant will survive the expiration of the employment contract and/or relationship;
- That the employee was afforded an opportunity to consult with counsel.