Is Your Non-Compete Agreement too Broad?

In the employment world, covenants or agreements not to compete have become more and more popular over the years. Likewise, the prohibitions employers are including in these agreements seem to be increasing along with that popularity. That is not good news for employees. Luckily, there are laws in place that protect employees from non-compete agreements that are overly broad. The basic rule is that the agreement should only be broad enough to cover the company's legitimate business interests. Anything beyond that may make the agreement unenforceable.

What is a Non-Compete Agreement in Alabama?

A non-compete agreement, also referred to as a covenant not to compete, is an agreement an employee makes with his employer, not to enter into, or start a similar trade or profession that would be considered competition against that employer. The purpose of these agreements, from the employer's perspective, is to prevent an employee who is subsequently terminated or resigns, from working with a competitor, or starting his or her own business, with a competitive advantage gained from previous employment. This reasoning assumes that the employee would use some confidential information gained while working for the former employer, such as trade secrets.

How can I challenge a non-compete agreement?

In order for a non-compete agreement to be valid, it must meet certain requirements. When those requirements are not met, the agreement can be ruled unenforceable by the court. First, the employer must have a protectable interest, such as trade secrets, confidential business information or valuable client relationships developed over time. If any of this information is essentially open to the public, it is not considered a protectable interest. The time limitation imposed by the agreement must be reasonable. In general, a period of less than 6 months is presumed valid, and any period over 2 years is presumed invalid.

Courts also often consider any limitations that create undue hardship on the employee. The court has the job of balancing the right of the company to protect its legitimate business interests, with the needs of the employee to find work. When a non-compete agreement is too broad, it makes it unnecessarily difficult for the employee to find work after his employment with that company ends.

An example of an overly broad, non-compete agreement

In the case of Orca Communications Unlimited LLC v. Noder, the Arizona court found a covenant not to compete to be overly broad. The agreement prohibited the employee from advertising, soliciting or providing conflicting services for any company that competed with Orca. When the employee left Orca, she started her own public relations firm, and Orca sued her for breach of the non-compete agreement.

There were two particular provisions the court found to be overly broad. The first was the prohibition against convincing any former, current or prospective customer of Orca to end its relationship with Orca. The court held that preventing the employee from doing this with companies which never had any business dealings with Orca, imposed undue hardship on the employee and was overly broad. The court also found the provision regarding trade secrets too broad. The court held that even if a business has to conduct substantial research to gain the special knowledge, it may still be considered in the public domain. As such, the information cannot be protected by the confidentiality agreement.

If you feel you have questions regarding a non-compete agreement, or any other questions regarding your employment rights, please contact Wrady & Michel, LLC, either online or by calling us at (205) 265-1880.

Categories: Non-Compete Agreement
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