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Are Non-Compete Provisions in an Employment Contract Enforceable?

May 13Contract

A non-compete provision in an employment contract prohibits an employee from working at another company that competes with the employee’s current or former employer. The non-compete provision could also prohibit an employee from directly competing with the former employer by starting a competing company. You usually see these with jobs that require development of technology or ideas, and the employer does not want an employee to use that knowledge elsewhere. Another industry that you will see a non-compete provision is in sales, where the employer does not want an employee to leave and use a sales list at another company. A non-compete can also be a stand-alone contract and not as a provision in an employment contract, and they can be used in any industry.

Non-compete provisions and agreements may be enforceable. The legal standard in Nebraska is that non-competes are enforceable if they are reasonable. So, what makes it reasonable? Or conversely, unreasonable? This question tends to be fact based, but there are some common things courts look at because they are commonly part of non-competes.

Length of time that an employee cannot compete is often part of a non-compete. Often a one-year length of time is held to be reasonable and therefore enforceable. The Nebraska Supreme Court has held that a non-compete for a length of time of 4-5 years is unreasonably long and unenforceable.

Geographical scope is also often part of a non-compete. This means that the employee cannot compete within a certain radius of the former employer. The Nebraska Supreme Court has held that a 45-mile radius is reasonable, but that restricting a former employee from working anywhere in Nebraska is unreasonable.

There are a few public policies at play when it comes to the enforceability of a non-compete agreement. One of those policies it that as a society, we want people to work and provide for themselves and their families. If we allow severe restraints on a person working in an industry in which they are trained, it impedes that person from working and earning a living. The competing policy is that we want businesses to receive protection for their proprietary information developed through the company’s and employee’s efforts.

If you need help with contract disputes, contact the contract attorneys at Berkshire & Burmeister to discuss your issues!

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