Anytime someone works closely with a particular business, whether as an employee, franchisee, or even outside counsel, they are usually granted access to sensitive information regarding how the business is run. In order to keep their trade secrets safe and protect their business interests, companies frequently require certain people to sign a non-compete agreement. This type of agreement is usually included in an employment contract or, in some cases, a franchise contract. It places restrictions on when and where the person can do business, and sometimes even who the person can do business with. For example, stealing employees and/or customers from a business is generally considered to be sabotage and most non-compete agreements prohibit such practices.
Having a party sign a non-compete agreement and getting a court to uphold the agreement are two different things. Most courts recognize the need of businesses to protect their own interests and that one of the ways they do so is through non-compete agreements. But many courts consider whether the agreement protects only the company’s legitimate business interests. If the court deems the agreement to be overly broad, it could rule that the agreement created too heavy a burden on the individual, and so is not enforceable. Continue reading ›