Noncompete agreements: Defined, drafted and challenged

Noncompete agreements can protect employers in a competitive market, but they must be drafted carefully to survive legal challenges.

Businesses throughout the country take a number of steps to help keep a competitive edge. One of these steps is the use of noncompete agreements. These agreements can be controversial, as recently showcased with sandwich-making giant Jimmy Johns courtroom battle over the validity of their noncompete agreement. The company faced accusations of having an agreement that was too broad and oppressive. The agreement required sandwich-makers and delivery drivers not work for a competing establishment for two years after leaving employment with the company, according to an article in Slate. The agreement went even further by defining a qualifying business as one that derives more than 10 percent of its revenue from selling sandwiches and is located within three miles of any Jimmy John shop.

Jimmy John's is not alone. Litigation around these agreements is on the rise. An article by The Wall Street Journal discussed the issue, stating that the number of departing employees facing lawsuits from employers for violations of noncompete agreements has risen over 60 percent during the last decade.

Noncompete agreements: Definition

Noncompete agreements are legal tools intended to protect businesses from loosing valuable assets like trade secrets and employees. Essentially, these agreements involve the employer and employee agreeing that the employee will not find comparable work with a competitor.

Noncompete agreements: Drafting

Provisions that are too strict or confining may not survive a challenge in court. The American Bar Association, a group of legal professionals from throughout the country, note that courts generally look at three main elements when determining if a noncompete agreement will survive a legal challenge: business interest, time and geography.

Some examples that qualify as legitimate business interests to warrant a noncompete agreement include trade secrets, confidential business information and the presence of a client list. The time element refers to the amount of time the agreement is in effect. Standard agreements range from six months to one year. Any agreement that has a time period that lasts for longer than this may not survive a challenge. The geography element refers to the locations the agreement covers. An agreement for a company, for instance, that covers the entire country when the company only does business in a limited number of states will likely not stand.

Noncompete agreements: Legal counsel

Employees concerned about the limitation of these agreements can benefit from legal counsel. Business owners looking to determine if a violation of a noncompete agreement exists or working to draft an enforceable agreement are also wise to seek legal counsel. An experienced business litigation attorney can help business owners and employees alike, working to better ensure a more favorable outcome.