It’s not uncommon for businesses to develop forms of non-compete and non-solicit restrictions and then roll them out across most or all of the workforce. This is often done without giving sufficient thought as to whether using the same form for all employees is permissible, and whether there are statutory prohibitions against requiring certain employees to enter non-competes. One size does not necessarily fit all when it comes to non-competes.
When implementing a non-compete regime, employers will need to consider:
- Are there prohibitions (as exist in some jurisdictions) against requiring low wage workers, or non-exempt employees, to enter into non-competes?
- If an employer requires a broad range of employees to enter the same non-compete, can it explain why doing so is necessary to protect the legitimate interests of the business?
- Will taking an aggressive approach on restrictive covenants drive away potential recruits or cause resentment amongst existing employees (including those not currently planning to join a competitor) who might feel they are being restricted from leaving and earning a living with another business?
Whenever a business is planning to ask a new hire or an existing employee to enter into an agreement that contains restrictive covenants, it should consider whether, and how, to tailor those covenants to the particular circumstances and consider whether there are statutory prohibitions against requiring certain employees to be bound by non-competes. A template agreement that has been developed with in-house or outside counsel can serve as a starting point, but it should be reviewed and may need to be adjusted on a case-by-case basis.
For certain employees, particularly those in lower-level positions, it might not be necessary or appropriate to have anything other than confidentiality provisions. In other cases, it might be necessary to have longer and broader non-compete and non-solicit restrictions for key employees with significant customer contact and access to confidential information.
When considering these issues, remember that restrictions can always be customized. It’s not just a question of including a non-compete versus having none at all. A non-compete can be adjusted in various ways to address the relevant circumstances, such as lengthening or shortening the duration and varying the geographic scope. And if circumstances change, such as an employee being promoted or transferred, it may be possible to require them to execute a revised agreement at that time.
The more thought an employer puts into tailoring the restrictions at the outset, the easier it will be to justify them to the employee and, if necessary, to a court that is being asked to enforce the covenants.
