Non-compete Covenant Lawyers

What Criteria Must Be Present in a Reasonable Non-Compete Covenant?

There are several criteria that should be present to make it easier for courts to enforce the covenant not to compete:

• Reasonable time restrictions
• Reasonable geographic scope
• Narrow class of customers and competitors which are inaccessible
• Adequate consideration

Reasonable Time Restrictions

Depending on the industry, time restrictions vary. In manufacturing and marketing industries, courts have found two years to be reasonable. But in technology-based industries, courts have held covenants of even one year to be unreasonable.

Reasonable Geographic Scope

Most geographic restrictions are limited to the area where the employee worked. However, in industries such as Internet companies that do business worldwide, national covenants not to compete are considered reasonable if other factors are also reasonable.

Narrow Class of Customers and Competitors which Are Accessible

The more specificity in the covenant, the more reasonable the covenant will be. The covenant is likely reasonable if it only names customers with whom the employee had constant contact with and competitors now known and excludes possible competitors established later.

Adequate Consideration

If the employee receives some form of compensation at some point, either via promotion or raise during employment or compensatory pay upon departure from the company, the restriction will likely be upheld by a court.