To be enforceable, a “non-compete agreement” or a “covenant not to compete” must be limited to only a specific duration. Public policy favors people having jobs and being able to earn a living in the industry in which they have been working and disfavors any encumbrances to this. Accordingly, most non-compete agreements only apply for a certain period of time after the employee leaves the employer. For example, if an employee leaves her company, the covenant not to compete may prevent her from owning or working for a competitor for a six months or a year after the end of her employment. The longer the duration of the restriction on competition the more likely a court is to find the covenant unreasonable and therefore unenforceable.
Deciding whether the duration of the non-compete agreement is reasonable requires balancing competing interests. Employers have an interest in protecting their legitimate business interests after an employee departs. Employees have an interest in being able to work in the same industry without undue burden.
Many courts enforce non-compete agreements with a duration of six months. A year is also a common time limit for covenants not to compete. Whatever the duration, the employer will have to prove that the specified duration is the shortest duration required to protect its legitimate business interests. In today's ever-changing world, significant changes can happen within a company in a matter of months. The result of this is that any trade secrets that the employee has that could damage her former employer may lose their relevance after just a few months.
While this provision in employment contracts for covenants not to compete to last a certain period of time has clear benefits for the employer, the employee may need a source of income right away. Many employees cannot afford to wait several months before finding another job. Depending on the job market, an employee may have to wait until several months after the non-compete agreement expires before she gets hired by a competitor. Compounding the issue is the fact that a covenant not to compete which lasts a year after termination of employment with the company may mean that the employee’s skills will atrophy. This is particularly true in quick-developing fields such as technology. Courts take all this into consideration when deciding whether the duration of the restrictive covenant imposes an undue hardship on the employee.
To avoid a determination that the burden imposed on the employee is undue, an employer should carefully restrict the duration of its restrictive covenant to the smallest duration necessary to protect its legitimate business interests. Common sense dictates that an enforceable restrictive covenant of a short duration trumps a restrictive covenant of a much longer duration that a court refuses to enforce. Employers and employees alike should consult with experienced attorneys to determine what the proper duration for a given restrictive covenant is.
The attorneys at DiTommaso Lubin Austermuehle have decades of experience negotiating and litigating cases involving non-compete agreements in Chicago and Cook, DuPage, Lake, Kane, Will, and the surrounding counties. They work tirelessly to stay abreast of the constant developments in the law regulating employment contracts and non-compete agreements. To see if your non-compete agreement is enforceable, contact us online today or call us toll-free at 877-990-4990 or at 630-333-0000.