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Include fair geographical and time limits in noncompete pacts

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in Employment Law,Hiring,Human Resources,Leaders & Managers,Management Training

Noncompete agreements are easier signed than enforced. So your noncompete restrictions must give the person a "reasonable opportunity" to pursue a livelihood in his or her chosen field.

What's considered reasonable? Courts will quickly nullify any noncompete that effectively prevents ex-employees from earning a living.

Make sure the noncompete includes a provision identifying which customers and prospective customers the employee may not solicit; and an "employee piracy" provision that prevents the person from recruiting your staff.

Note: Some state laws make it particularly tough to enforce noncompetes. Run your noncompete by an attorney familiar with state law.

Recent case: Hairstylist Kathy King quit her job at a Head Start Family Hair Salon and took a management job at a competing salon in the same shopping center. Soon after, she began recruiting former co-workers to her new salon.

The problem: King had signed a noncompete agreement that prohibited her from working at competing businesses located within a two-mile radius of any Head Start salon for a year after leaving. The pact also banned her from recruiting Head Start co-workers.

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 her 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)

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