At Lockaby PLLC, we negotiate, draft, review and when necessary, represent in litigation Kentucky employers or employees on matters arising from agreements not to compete. An employer may require a new or existing employee to sign a noncompete as a condition of employment in which the employee agrees not to compete against the employer after leaving employment.
Noncompetes must be reasonable for both parties
In Kentucky, courts enforce reasonable noncompetes that balance an employer’s investment in the training and skills of the employee as well as that person’s knowledge of the employer’s internal business information, with the employee’s right to continue their career building on their work experience and industry knowledge.
Specifically, courts will consider the type of business of the employer and the circumstances of the employer-(ex)employee relationship. A reasonable, enforceable noncompetition agreement gives fair protection to the employer’s interests while not restricting the employee’s future job opportunities at a level that would be an undue hardship on them or that would violate public policy.
Specifically, a court will analyze whether these terms are reasonable:
- Duration: How long does the agreement restrict the competitive activity of the employee?
- Geographic reach: How big is the physical area in which the employee may not compete?
- Purpose: Is the restriction for a valid reason business reason?
An employer may ask a state court for injunctive relief before trial in a lawsuit over breach of the agreement. This means the court would order the ex-employee to stop engaging in commercial activity that the employer believes violates their noncompete, usually pending resolution of the suit.
The court could accomplish this through a restraining order or a temporary injunction, depending on the situation. To get injunctive relief, the employer must show that without the order, the employee’s ongoing competitive activity that the employer alleges violates the agreement will cause the employer immediate, irreversible injury or loss. The employer may also request injunctive relief to continue after the trial.
On the other hand, the ex-employee may allege that the noncompete is unreasonable and unenforceable. If the court finds the agreement is against public policy or that the duration or geographic restriction in a noncompete is unreasonable, it may throw out the entire agreement or it may modify either or both restrictions to make them reasonable. What is reasonable is going to depend on the type of business, the industry in question, the size of the market, the density of the market and other factors.
For example, if the employer is a local landscaping business that does work in a radius of about 50 miles, it would likely be unreasonable for a noncompete to restrict an employee from working in a competing business across a whole state or region.
The court may also grant money damages to compensate for financial loss and even punitive damages for particularly extreme negative behavior.
Seek legal advice
Whether an employer or an employee, an attorney can provide advice and representation in all matters pertaining to a noncompetition agreement.