Las Vegas Business Law Attorney
A noncompete agreement, also known as a covenant not to compete, is a contract that typically occurs between an employer and prospective employee that is entered into at the time of employment. Such agreements restrict the scope of employment possibilities for the employee in the event he or she should leave the prospective employer. The purpose of noncompete agreements is to protect proprietary information owned by an employer and limits the employee’s ability to go into business as a direct competitor against the employer. These types of agreements are often extremely broad and limiting for the employee. Because of their restrictive nature and the compelling public interest in promoting free enterprise, courts often hesitate to enforce agreements not carefully crafted and specifically tailored to the circumstances at hand.
The primary factors considered by courts examining noncompete agreements are consideration, breadth, duration and geographic scope. Since noncompete agreements are interpreted as contracts, there must be appropriate consideration offered in exchange for the limiting of trade. Unfortunately, there is no set value and appropriate consideration must be determined on a case-by-case basis. The primary purpose of these agreements is to protect trade secrets and client lists so restricting an employee from working in areas not impacting either of those factors will be frowned upon and overly broad noncompete agreements are subject to being rendered unenforceable when appropriately challenged. Other important factors are the length of restriction on employment and the geographic scope of the limitation. If an agreement is longer than a year, it is typically met with skepticism. Likewise, noncompete agreements extending across an overly broad geographic area are likely to be disallowed. The guiding principle in examining noncompete agreements is reasonableness with incentive to allow freedom of movement for employees, but this must be balanced against an employer’s desire to protect proprietary methods and client lists accumulated through labor and expense.
Anytime a noncompete agreement is at issue, consulting an experienced Las Vegas business law attorney to understand full ramifications is strongly recommended.
The Dobberstein Law Group provides essential guidance in negotiation, drafting and interpretation of noncompete agreements.