Is Your Non-Compete Valid?

Is Your Non-Compete Valid?

Matt: Hi, it’s Matt Plessner, and welcome back to Non-Compete Law Radio. How do you know your non-compete is, for all intents and purposes, valid? To answer this question and of course, much more, we’re joined again today with attorney at law Mark Clark from the Traverse Legal office of Traverse City, MI. Mark, thanks for joining us.

Mark: Thank you, Matt. It’s my pleasure to be here.

Matt: Well, it’s a pleasure to have you. Now, let’s start out simply: what are some of the most basic ways to know if your non-compete is, indeed, valid, Mark?

Mark: Well, first of all, we’ll probably need to distinguish the question of “is your non-compete valid?”  whit the corollary question of “is your non-compete reasonable?”  most courts around the country will assess a non-compete for the issue of reasonableness in both a geographic scope relative to geographic limitations, and for duration, in terms of limitations. The question that is sometimes missed or does not get answered, in the first instance is, is your non-compete valid? Matt: Ok. Well, so we’re talking about geographic locations, and of course, that’s a big factor when it comes to reasonability, as you’re talking about right there. I guess, with geographic location, how far away are, I guess, two businesses or anything else involving a non-compete, allowed to be?

Mark: Well, in terms of the scope of reasonability that will really depend, Matt, on the particular facts and circumstances in each case.  Ordinarily a court will not enforce or will not find a non-compete reasonable if it goes beyond the scope of the former employer’s business. In other words, if it is over-broad and limits the employee from engaging in the activity beyond the scope of the market of his former employer. Now, the question of whether a non-compete is valid VS whether a non-compete is reasonable is a completely separate question. Your non-compete may be invalid for a number of different reasons.

Matt: Ok, and what are some of those reasons (just an overview),Mark? Mark: Sure. You may have an invalid non-compete if the non-compete restrictions appear in a general employment contract agreement, and the employer breaches the contract first. So, in other words, you may have a basis if your employer breaches the entire agreement for invalidating your non-compete restrictions that are within that agreement.

Matt: And, just out of curiosity, Mark does the size, or even how successful the company or business is, does that come into play with reasonability?

Mark: In terms of reasonability, generally not. The courts look at it simply from the particular facts and circumstances surrounding both the market, the job descriptions, what the employee will be doing in a subsequent job relative to both geographic scope, and job duties and responsibilities. Now, in terms of whether or not a non-compete is valid, there are also other reasons why your non-compete, as opposed to being reasonable or unreasonable, may not be valid in the first instance. In most states, the court needs to make a threshold finding an employer’s legitimate business interest. If an employer cannot identify a legitimate business interest, in enforcing that non-compete with respect to that particular employee, given that employees job duties and responsibilities, that we may never get to the issue of reasonableness. Now, some of the legitimate business interests that courts have recognized may include protection of specific trade secrets and some of the relationships that the employer has built with it’s customers. Those may be found to be legitimate business interests. Nevertheless, the employer does not identify those legitimate business interests in the agreement, or cannot otherwise establish that it has a legitimate business interest in protecting these types of interests in relationship to the particular employee and his or her job responsibilities, then your non-compete agreement may simply be invalid

Matt:  Well, this is all really good to know Mark. And of course we’ve talked about this before, always have an experienced non-compete attorney validity and make sure that it’s reasonable, correct?

Mark: Absolutely, because whether or not a non-compete is valid or invalid which is really a threshold question, takes a detailed analysis of all the facts and circumstances behind the non-compete. Additionally, if we get to the question of whether it’s reasonable, that question also undertakes a detailed analysis of the specific facts and circumstances behind that employer’s business, the employees specific job duties, and the particular market being served by that employer and employee, specifically as it relates the employees subsequent employment.  

Matt: Well Mark, as always, I want to thank you for joining with us today and talking with us about non-competes, and of course we look forward to future interviews with you.

Mark: Thanks Matt, it’s always a pleasure to be with you.

Matt: And it’s a pleasure to have you, and once again, this is Matt Plessner for Non-compete Law Radio.