Aldrich Law Firm, Ltd.
Aldrich Law Firm, Ltd.

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Are all noncompete agreements enforceable?

Companies invest heavily in employee training. Because this can be very costly, businesses often require employees to sign contracts promising that they will not take a comparable position with a competitor. While once reserved for high-level employees, the American Bar Association notes that the number of workers asked to sign these noncompete agreements has risen in the last few decades, as has the amount of litigation related to these contracts.

At the heart of many noncompete lawsuits is the issue of whether the contract is enforceable. While most situations will require a case-by-case analysis, there are two types of contractual provisions which are generally suspect when included in a noncompete agreement: time restrictions and geographic limitations.

Employers likely want their noncompetes to last as long as possible, but as a general rule the duration of such contracts cannot extend past two years. Anything beyond that and the provision may be deemed unenforceable due to unreasonableness. Time limits of six months to one year are more likely to be upheld.

It is common for noncompetes to include a geographic limitation that specifies the area in which former employees cannot work for a competitor. While these clauses can be valid in certain contexts, if the geographic restrictions are overly broad employees may have a strong argument that the provision should not be enforced.

It should be noted that breach of contract litigation involving noncompete agreements can be initiated by either the employer or the employee. Employers may choose to pursue this route when they believe their business interests are at risk. Employees may opt to engage in litigation when they feel that a noncompete places too many restrictions on their ability to find employment.

John P. Aldrich
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