There are many aspects to dealing with non-compete agreements in Kentucky. The legal standards for non-compete agreements, negotiating with former employers or employees to enable the employee to take a new job, as well as the various kinds of legal actions which can arise out of a non-compete agreement are discussed below.
A great deal of money is generally invested by companies in building a client base or perfecting processes or inventions. Keeping such things confidential is necessary in order to survive in the business world. Important business secrets such as customer lists, sales technique information and confidential business product information are often divulged to employees in sales or manufacturing representative positions. This information is understandably sought to be protected by companies. A common way to protect this information is by requiring the employee to sign a non-compete agreement.
Take, for example, a hair salon. A great deal of money may have been spent by the salon advertising to attract a steady customer base. Such customers are typically loyal to the hairstylist who services them at the salon and not the salon in general. Therefore, if the hairstylist leaves and begins working at another location it would be easy for that hairstylist to contact and recruit her former customers. Under such a scenario, the salon would have effectively paid valuable advertising dollars to attract customers for its former hairstylist. Consequently, the salon requires all new hairstylists to sign a non-compete agreement prohibiting them from working within 30 miles of the salon for a period of 2 years after leaving the salon.
Non-compete agreements are governed by a distinct body of law. Differing from most employment contracts, the non-compete agreement has the effect of inhibiting commerce. The law generally favors public policy, and public policy generally favors the unrestricted right of people to find employment and work in the positions of their choosing. Consequently, because restricting people from work is not favored by public policy, a non-compete agreement has to be properly limited geographically and temporally (length of time of the non-compete), limited by industry, and limited to protect only the legitimate interests of the company.
Prohibiting someone from working anywhere in the country through a non-compete agreement is far less likely to be valid than one which prohibits someone from working within 10 miles of the former employer’s place of business. Generally, the geographical scope of limitation will depend on the kind of work involved. The salon in the example above may have an interest in keeping the stylist from competing around the block but the non-compete agreement becomes less reasonable if it prohibits the stylist from competing anywhere in the state. Most of the clients will not travel long distances for such a service, but will stay with the salon if the hairstylist found a job across town. Under such a scenario, a valid non-compete agreement could force the hairstylist to travel to another city in order to work.
The non-compete must be limited to a reasonable amount of time. The salon can expect that the vast majority of the customers will have found other stylists at the salon if the hairstylist is gone for a year or elsewhere. After this amount of time has passed, the hairstylist would likely be unable to attract former customers away from the salon. Conversely, the law recognizes that the hairstylist will be seriously harmed if he/she is out of work for over a year.
The needs of the employer must be balanced against those of the employee for a valid non-compete agreement. You need an experienced lawyer if you are preparing a non-compete agreement so that it will not be held invalid. If you are an employee and are dealing with a non-compete agreement, there are multiple ways to challenge its enforceability.
Enforcing a Non-Compete Agreement
There are numerous ways in which a non-compete agreement can impact the parties once an employee has left a business. Upon finding another job, the former employer could have a claim or file a case against the employee to make him or her quit the new job. The new employer could ask to see the employees non-compete agreement and refuse to employ the individual until such time that the prospective employer is confident hiring the employee would not violate the terms of the non-compete agreement. Under such circumstances, the employee may well have to hire a lawyer and file a lawsuit and ask a judge to rule whether the non-compete agreement is enforceable.
Employment lawyers regularly encounter three main issues in dealing with non-compete agreements. The first issue is negotiating with the employer or employee to draft a non-compete agreement acceptable to both parties. The next issue is representing the former employer in a lawsuit against a former employee who is allegedly violating a non-compete agreement. The third issue is representing one of the parties when the former employee files a case against the employer to have the non-compete agreement declared invalid by a court. This last element is called a declaratory judgment action.
In addressing a dispute between a former employee and a former employer, the first step the Shelton Law Group takes is to attempt to negotiate a settlement of the dispute. What is it the former employer needs to protect and how can that be done with the least harm done to the employee? Could limitations be placed on the employee at the new company so as to satisfy the former employer? As long as the employer and employee are being reasonable, accommodations can be made more often than not.
A former employer may file a lawsuit against the employee seeking a court order to prevent the employee from working if the employee takes a new position which the former employer believes is in violation of the non-compete agreement. There is a heavy burden placed on the former employer in such cases. The non-compete agreement has to be proven valid to the court – that it is for a valid purpose and limited in time and geography. Simultaneously, the employee must defend the case in order to keep his or her job.
Another possibility is that the employee is unable to find a job. In this particular situation, a non-compete agreement’s validity is called into question by the employee and a claim is filed by the employee against his/her former employer. As discussed earlier, the law favors the employee in such cases. If the court finds the non-compete agreement to be invalid and enters a “declaratory judgment”, it may change the terms of the non-compete agreement to make it more reasonable in scope or it can eliminate it altogether.
Based in Louisville, Kentucky, the Shelton Law Group practices Kentucky employment law, including non—compete agreement law, throughout the Commonwealth, including Jefferson, Shelby, Oldham, Fayette, Kenton, Boone, Campbell ,Warren and Owen Counties. Contact the Shelton Law Group today at l 888-761-7204 to speak with a lawyer. At the Shelton Law Group – we take your case personally.
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