States Vary On Upholding Broad Non-Compete Covenants

Many recent decisions concerning the enforceability of a covenant not to compete in a strictly employment context (as contrasted with a covenant arising out of the sale of a business, which is a very different situation) seem to focus on the following three principles: (a) ascertain the permissible scope set out in all relevant legislative enactments; (b) assign to the ex-employer the burden of producing evidence that the covenant fits within the statutory limits and is no broader than necessary to protect the ex-employer’s legitimate business interests; and  (c) if the ex-employer meets its burden, assign to the former employee the burden of persuading the trier of fact that enforcement would be oppressive.  These principles are not always applied.  Even when they are present, they sometimes lurk beneath the surface and are not always easy to discern in or from court rulings.  Moreover, judicial precedents within a given jurisdiction – to say nothing of those from diverse locales – often appear irreconcilable.  As a result, lawyers must be very cautious in providing advice and predictions to an employer, particularly one with operations in several states, regarding the enforceability of covenants.

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