Non-compete Agreements
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March 3, 2009
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Non-compete agreements essentially signify that an employee agrees not to work for a competitor for a preciseduration (Tennessee Employment Law Center, 2009). There are numerousconcerns that need to be concentrated onprior to the creation of an agreement that may be potentially help up in a court of law.
Avitalprerequisite is that the agreement needs to be practical and realistic. What does this entail? In practice, this implies that the agreement should not put a stop to the employee joining too many businesses. In addition, the agreement should not pertain to businesses in an enormouslyvast geographical locale. Most importantly, the duration should not be too excessive. For example, a maximum duration of two years is typically accepted by courts to be practical.
Covenants not to compete are particularly found objectionable in Tennessee, but are stringently enforceable if specific criteria are satisfied (Tennessee Employment Law Center, 2009). They require that there is a legitimate business interest to be protected and the time and territorial limitations in the covenant are reasonable. Factors relevant to whether a covenant is reasonable include the consideration supporting the covenant, the threatened danger to the employer in the absence of the covenant, the economic hardship imposed on the employee by the covenant, whether the covenant is inimical to the public interest, and that the time and territorial limits must be no greater than necessary. See Murfreesboro Medical Clinic, P.A. v. Udom, 166 S.W.3d 674, 678 (Tenn. 2005) (Tennessee Business Litigation, 2009).
A goodindication of what makes a party "protectable" can be found in Vantage Technology, LLC v. Cross, 17 S.W.3d 637, 644 (Tenn.Ct.App.1999) (Tennessee Business Litigation, 2009). The bottom line is that the facts need to be such that without the covenant, the employee would gain an unreasonable advantage in future competition with the employer. While making this determination, the court needs to considerwhether the employer provided the employee with specialized training, whether the employee is given access to trade or business secrets or other confidential information, and whether the employer's customers tend to associate the employer's business with the employee due to the employee's repeated contacts with the customers on behalf of the employer (Tennessee Business Litigation, 2009).
In most cases, a company needs to center on its critical business function and establish which employee(s) are imperative for the business function. Non-compete contracts should not always be signed from all employees of the company. It is helpful in court to have amotivation or a possible reward that is connected to the agreement. This is not appropriate to an employee who is required to sign the non-compete agreement at the time of his/her employment. However, in our specific case, since the software engineer is designing for the company, I have strong business rationales as to why I need to protect the trade secrets. We areoffering the software engineer a position and that is certainly adequate consideration. Weshould enter into a non-compete agreement with the engineer for a reasonable time (roughly two years) and a reasonable geographic region (possibly Tennessee and its surrounding states).
Works Cited
Tennessee Business Litigation. Accessed from: noncompete-agreements.html on March 4, 2009.
Tennessee Employment Law Center. Accessed from: on March 4, 2009.