Restrictive Covenants in Employment Agreements: Guarding the Family Jewels, Part I

Happy 2013! The Emplawyerologist kicks off the new year by continuing its new mini-series on restrictive covenants. Last week’s post provided an overview of restrictive covenants and key provisions. The burning questions for many employers, however, are, when are they enforceable? How broad can the restrictions be? What remedies are available to employers when employees violate their restrictive covenants, also known as “non-competes”? To review one point from last week: there are six states in which restrictive covenants are essentially non-enforceable, California, Colorado, Hawaii, Montana, North Dakota and Oklahoma. Many of the remaining states are what we call “blue-pencil” or equitable modification states, i.e. states that allow a court to make what we might see as minor edits to otherwise unenforceable provisions in a restrictive covenant rather than striking down the entire non-compete. Arkansas, Louisiana, Nebraska, Virginia and Wisconsin, while they will enforce restrictive covenants, are not "blue pencil" states, and do not allow equitable modification. Let’s assume for the moment that you do business in one or more states that will enforce restrictive covenants. What factors do most courts consider to determine whether they will in fact enforce the “non-compete”?

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