Are Noncompete Agreements Enforceable?
At Hyland Law Firm LLC, Attorney Charles Hyland often helps clients understand the nuances of noncompete agreements. These agreements are common in many industries and are used to protect businesses from losing employees to competitors.
However, many employees wonder if these agreements are truly enforceable, especially when they feel restricted in their ability to find new work. This blog will explain the enforceability of noncompete agreements under Kansas and Missouri law, focusing on their requirements, limitations, and potential issues.
This blog will explain the enforceability of noncompete agreements, focusing on their requirements, limitations, and potential issues. Whether you're an employer or employee, knowing your rights and responsibilities regarding noncompete agreements is essential in making informed decisions and avoiding unnecessary legal disputes.
What Is a Noncompete Agreement?
A noncompete agreement is a contract between an employer and an employee in which the employee agrees not to engage in certain activities that could compete with the employer's business during or after their employment.
These agreements often prevent employees from working for direct competitors or starting a competing business within a specific time frame and geographic area.
While these agreements are meant to protect a business's interests, including intellectual property and confidential information, they can also be a source of frustration for employees who may find their career options limited.
The enforceability of these agreements depends on several factors, which vary depending on the jurisdiction and the specific terms of the contract.
Factors Affecting Enforceability
Kansas allows noncompete agreements but with specific limitations. Courts in these states generally enforce noncompete agreements only if they’re deemed reasonable. This reasonableness is evaluated based on several factors, including the following:
Reasonable duration: Noncompete agreements must be limited in time. Agreements that last longer may be seen as too restrictive and unenforceable. Courts will assess whether the length of the restriction is necessary to protect the employer’s legitimate business interests.
Geographic scope: The area covered by the agreement must be reasonable. If an employer tries to prevent an employee from working in a state, the agreement may be found overly broad. Courts usually enforce these agreements within a specific area where business is conducted, such as the Kansas City Metro Area.
Type of work: The type of work the employee is prohibited from doing also plays a role in enforceability. An agreement that prevents a worker from engaging in a wide range of professional activities could be deemed unreasonable if the restrictions are unnecessary for the employer’s protection.
Legitimate business interest: Noncompete agreements must protect a legitimate business interest, such as trade secrets, confidential information, or customer relationships. If an employer can’t demonstrate that the noncompete is necessary to protect such interests, the agreement may be unenforceable.
Can Noncompete Agreements Be Invalidated?
While noncompete agreements are enforceable in many cases, they can also be invalidated if they’re deemed unreasonable or overly restrictive. The following circumstances could lead to the invalidation of a noncompete agreement:
Lack of consideration: In order for a noncompete agreement to be enforceable, there must be a consideration or something of value exchanged. If an employee is asked to sign a noncompete agreement after they’ve already been hired, the agreement may not be valid unless additional consideration is offered.
Overly broad restrictions: As previously mentioned, if a noncompete agreement is too broad in terms of time, geography, or scope of work, it may be thrown out. If the restrictions impose undue hardship on the employee without providing protection for the employer, courts may refuse to enforce them.
Public policy concerns: Noncompete agreements can be struck down if they conflict with public policy. Courts may refuse to enforce an agreement that restricts a person’s ability to earn a living, especially if the employee's position doesn’t involve sensitive information or interests that would justify restrictions.
Enforcing Noncompete Agreements
If a noncompete agreement is found to be enforceable, the employer can take legal action to prevent the employee from violating the terms of the contract. This typically involves seeking an injunction, which is a court order requiring the employee to stop engaging in prohibited activities.
In addition to an injunction, the employer may seek damages for any harm caused by the employee’s violation of the noncompete agreement.
For example, an employer might seek an injunction to prevent a former employee from working at a direct competitor within a specified geographic region if it can be proven that the employee is violating the terms of the noncompete. In some cases, the employer may also seek monetary damages if the violation has led to financial losses.
Alternatives to Noncompete Agreements
While noncompete agreements are one tool employers use to protect their interests, there are alternatives that may be less restrictive but still effective. These alternatives include:
Non-solicitation agreements: These agreements prevent employees from soliciting clients or employees from their former employer. They’re typically easier to enforce than noncompete clauses and are a good alternative for employers who don’t want to restrict an employee’s ability to work.
Confidentiality agreements: These agreements focus on protecting sensitive business information, such as trade secrets, proprietary formulas, or customer lists. Employees agree not to disclose or use confidential information for personal gain or to benefit a competitor.
Garden leave clauses: This clause provides the employee with a period of time during which they’re paid while away from the company as they transition out of their role. This approach gives the employer a buffer to protect their interests while allowing the employee to find other work after the period ends.
These alternatives are often seen as more flexible and can offer protection to employers without overly restricting employees' ability to continue their careers.
Frequently Asked Questions About Noncompete Agreements
Hyland Law Firm LLC hears many questions about the enforceability of noncompete agreements in Missouri. Some of the most common ones include:
Are noncompete agreements always enforceable? – No, noncompete agreements aren’t automatically enforceable. They must be reasonable in terms of duration, geographic scope, and the type of work prohibited. Courts will assess the specific facts of each case.
Can I be forced to sign a noncompete agreement after being hired? – If you’re asked to sign a noncompete agreement after being hired, it must be supported by additional consideration, such as a raise or promotion, to be enforceable.
How long do noncompete agreements last? – Typically, noncompete agreements should last no longer than one to two years to be considered reasonable. Agreements lasting longer may be deemed unenforceable.
Can I still work in my industry if I’m bound by a noncompete agreement? – If the agreement is enforceable, you may be restricted from working for a competitor or starting a competing business within the specified terms. However, if the agreement is too restrictive, it could be challenged in court.
What happens if I violate a noncompete agreement? – If you violate a noncompete agreement, your former employer may seek an injunction to stop your actions or claim damages for any harm caused by your violation.
If You’re Under a Noncompete Agreement, Reach Out
Attorney Charles Hyland strives to offer guidance to clients on business law matters, including the enforceability of noncompete agreements. If you need assistance in the Kansas City Metro area with a noncompete agreement, don’t hesitate to reach out to Hyland Law Firm LLC today to set up a consultation.