January 01, 2018

Effective Strategies in Drafting and Enforcing Non-Competes

Societal skepticism is growing about non-competes, but they are important tools when used with care.

Edward H. Pappas and Daniel D. Quick

Download a printable PDF of this article.

One of my primary objects is to form the tools so the tools themselves shall fashion the work and give to every part its just proportion.

—Eli Whitney

In the second half of the 20th century, noncompetition agreements went from largely banned in most states to almost uniformly accepted and enforced. While California has long taken a different view, most jurisdictions enforce non-competes so long as they protect legitimate business interests and are “reasonable” as to scope, duration, and geographic reach. Many jurisdictions also allow courts to “blue pencil” non-competes—a process by which a court may still enforce a facially overbroad non-compete by applying it only to the extent deemed reasonable.

While non-competes tend to be discussed largely in legal circles, they entered the public sphere in 2014 with gusto with the now infamous revelation that Jimmy John’s had non-compete agreements for its sandwich makers and delivery drivers. There has been resistance to non-competes here and there over the years. For example, Massachusetts has engaged in an annual tradition of introducing legislation to ban or scale back non-competes. Real momentum toward a reexamination of the prudence, fairness, and even macroeconomic effect of non-competes took a meaningful step forward in 2016, however. That is when the White House issued a report opining that non-competes were over-used and a threat to the economy, which was followed by a “call to action and set of best practices for state policymakers to enact reforms to reduce the prevalence of non-compete agreements that are hurting workers and regional economies.” The White House, Fact Sheet: The Obama Administration Announces New Steps to Spur Competition in the Labor Market and Accelerate Wage Growth (Oct. 25, 2016), https://obamawhitehouse.archives.gov/the-press-office/2016/10/25/fact-sheet-obama-administration- announces-new-steps-spur-competition. There is also a growing body of academic literature and commentary by lay journalists opining that non-competes hurt the economy and worker rights.

It is too early to say whether we are in the midst of a sea change in our culture’s tolerance of non-compete agreements, but these developments underscore the need for companies and the lawyers who represent them to take a business-like approach when it comes to non-competes. This means deploying non-competes selectively within the workforce, drafting them appropriately and with care, and then enforcing them as part of a broader business strategy and philosophy. This article provides advice on how to more prudently consider the use and enforcement of non-competes in order to align with overall business goals and enhance the likelihood, when necessary, of enforcement by the courts.

Premium Content For:
  • Litigation Section
Join - Now