Issue: Noncompete agreements are more easily signed than enforced.
Risk: One sure way to crush your noncompete's legality is to include overly restrictive time and geographical limits.
Action: Make sure your noncompete agreement gives the ex-employee a "reasonable opportunity" to pursue a livelihood in his or her chosen field.
Many organizations require key employees to sign noncompete agreements in an effort to secure trade secrets and prevent workers from jumping ship to a competitor next door.
The problem: A good number of these noncompetes would never be enforced in court because they place overly broad restrictions on where the ex-employee can work and for how long.
That's why your noncompete pact must give the person a "reasonable opportunity" to pursue a livelihood in his or her chosen field. Here's how one company went wrong:
Recent case: Hairstylist Kathy King quit her job at a Head Start Family Hair Salon and took ajob at a salon in the same shopping center.
But King had signed a noncompete agreement that prohibited her from working at competing businesses within a two-mile radius of any Head Start salon for a year after leaving.
Head Start sued, seeking to enforce the noncompete agreement.
While a lower court upheld the deal, the Alabama Supreme Court tossed out the noncompete, saying the geographic restriction was too restrictive, and it unreasonably limited King's future job prospects.
Court's reasoning: More than 30 Head Start locations are scattered through the two counties near Birmingham, Ala. So restricting her from working within two miles of any Head Start would have "dramatically increased King's difficulties in finding employment." (King v. Head Start Family Hair Salons Inc, No. 1021814, Ala. SupCt., 2004)
Note: Some state laws make it particularly tough to enforce noncompetes. Run your noncompete by an attorney familiar with state law before putting it into action.
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- 10 Secrets to an Effective Performance Review
- Manager's Checkup: Handling workaholic behavior on your team
- How should I handle a rude investigator?
- What's the big idea? Protecting employer-owned intellectual property
- Justice Department sues judge, courts for USERRA violations