Limited by Industry
One factor that courts consider when determining if a restrictive covenant is enforceable is the whether the restriction is limited to the employer’s industry. While courts permit an employer to protect its business interests, an individual must have options for employment outside of his former employer. Courts will generally find non-compete agreements that are not limited to a specific industry unreasonable and unenforceable. For example, take an employee who leaves a tech company to work for a publishing company. There would be little, if any, need to restrict the former employee’s ability to work in this industry. The tech company’s trade secrets are of little value to a publishing company and a tech company rarely, if ever, competes for the same customers as a publishing company. Our Chicago restrictive covenant enforceability lawyers understand that a non-compete agreement that would seek to prohibit the former employee from working in this unrelated industry would likely be found unenforceable. Requiring restrictive covenants to be limited by industry significantly widens the employee's prospects to find work after her employment with her former employer has been terminated.
It is important to note that a limitation by industry can be even further restricted to only a subset of the employer’s industry. A real life example of this involved a non-compete agreement included in a college football coach’s contract. The covenant not to compete prohibited the coach only from coaching another football team in the same conference. Under this agreement, the coach could leave the school and still coach college football provided that his next school was not in the same conference.
A non-compete agreement that is narrowly tailored by industry (or a subset of an industry) benefits both employers and employees. Properly limiting the application of the non-compete agreement to the employer’s industry (or subset thereof) safely avoids the possibility of imposing undue hardship on the employee by providing enough opportunities for other employment after leaving the employer. It also protects the legitimate business interests of the employer and raises the likelihood that its restrictive covenant will be found enforceable.
Whether or not a covenant not to compete that prohibits an employee from working in the same industry is enforceable relies in large part on the industry in which the employee works. The broader the industry and the more subsets contained therein, the more likely a restrictive covenant will have to be narrowly tailored to be enforceable. The restrictive covenant enforceability attorneys at our Chicago firm can advise you on how to narrowly tailor a covenant not to compete.
Employers and employees often fail to scrutinize their own restrictive covenants under the same microscopes courts will. This results in employers attempting to enforce overly broad restrictive covenants and employees feeling unduly burdened complying with such restrictive covenants. That is why having a highly experienced attorney to review restrictive covenants is crucial.
The Chicago restrictive covenant enforceability attorneys at DiTommaso Lubin Austermuehle have decades of experience negotiating employee contracts and non-compete agreements. It is always good policy to have a knowledgeable attorney review the contract for fairness before signing it. It is equally important to have a knowledgeable attorney advise you regarding the enforceability of the restrictive covenants after the employment has ended. If you have questions about a non-compete agreement or other restrictive covenant, please contact us online or call us at 877-990-4990 for an appointment with a restrictive covenant enforceability lawyer in Chicago.