Noncompete Agreements Must Be Reasonable

A noncompete agreement must also be "reasonable." What's reasonable? One that can't:

• last too long
• cover too wide a geographic area, or
• prohibit a former employee from engaging in too many types of businesses.

Generally, the biggest issue with noncompete agreements is how long the noncompete agreement lasts. While there's no set rule, noncompetes ranging from six months to two years are generally considered "reasonable," while anything longer than that will receive closer scrutiny. Outside of the employment context, longer noncompete agreements will often be enforced, such as in connection with the sale of a business.

Creating a Noncompete Agreement

To sum up, when you're putting together your agreement, here are a few things to think about:

• When you're deciding whether to ask an employee to sign a noncompete agreement, think about your goals. Is the employee so valuable, and have you spent so much money training the employee, that losing him or her to a competitor would damage your business? Does the employee have access to important information you don't want revealed to a competitor? Make sure you can come up with a valid business reason for asking an employee to sign a noncompete agreement.
• As tempting as it might be to create a "tough" agreement, it doesn't pay to be overreaching; remember, most courts will not enforce an unreasonable noncompete agreement, and it won't be worth the paper it's written on. Instead, try to create an agreement that's meaningful to you, but doesn't simply punish the employee for leaving your company.

While these rules might seem discouraging, they exist for a reason -- to protect employees from unscrupulous employees. As long as you're reasonable, the law will be on your side.

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