In order to maintain a successful business, employers strive to protect certain proprietary information of the company and to protect themselves from unfair competition. Often times, employers require employees to sign a non-compete or restrictive covenant agreement to this end. Iowa non-compete agreements are generally enforceable if they are found necessary to protect an employer’s business’, not unreasonably restrictive and are not prejudicial to public interest.
Necessity to Protect
If an employer stands to lose customers as a direct result of a relationship formed between the employee and the employer’s customers, a covenant not to compete may be ‘necessary’ to protect the employers business. This is found in a circumstance where an employee leaves a company and lures his or her customers from the previous employer over to a competing business. This is particularly apparent in a sales environment, where a salesman has control over customer relationships.
A non-compete might also prove ‘necessary’ in situations where an employee has received extensive, specialized and, oftentimes, costly training from an employer and then uses the benefit of the training to compete against the employer. This could be particularly egregious if an employee does not continue with an employer shortly after receiving the training, choosing to compete in a similar business instead.
Naturally, an employer wants to protect his business from an employee using personal knowledge or training provided to compete. The employer also wants to protect his customers from being seized. The employer may ask an employee to sign an agreement not to compete after leaving the company to protect his or her interests. However, the employer cannot preclude a previous employee from making a living, at least not indefinitely. The law requires that any agreement be reasonable in scope and duration.
What reasonable ‘is’ depends on weighing an employers potential benefit against the hardship and oppression of the employee. An employer is unlikely to prevail from barring an employee from competing across the globe, but will likely be able to restrict activity in a geographic area such as an employee’s previous sales territory. Even after restricting the geographic area, the agreement cannot limit the employee from competing in that area indefinitely. The amount of time has to be reasonable – usually one to two years will be considered fair.
Iowa has adopted the partial enforcement doctrine in response to overly restrictive covenants. In the old days, courts would throw out agreements which were too severe or, conversely, enforce them in whole if the agreement was sound for the better part. Now, the court has the power to enforce a covenant to the reasonable extent. This blue-lining, as it is referred to in some states, allows the court to enforce a non-compete to a reasonable degree with regard to factors such as geographic scope or time it will be enforced.
If you have accepted employment from and Iowa company and are asked to sign a non-compete agreement, it is advisable to work with an experienced attorney to ensure the agreement is acceptable before signing. This could save you from a costly legal entanglement if you switch jobs to a similar industry in the future.
If you have left your employer and are bound by a non-compete, you may find that the agreement you signed is unreasonable. It may be possible to approach the company for an accommodation or take the matter before a court to have the agreement modified with he help of a qualified attorney.
Circle The Wagons
If you have violated your non-compete agreement, you may be in for a legal battle with your previous employer. Our Iowa non-compete attorneys can help guide you through the process. There may be an issue as to whether a non-compete is too restrictive, selectively enforced or that you were not offered consideration when signing the non-compete, which may be grounds for limiting the non-compete or having it thrown out in its entirety. Contact the experienced employment law attorneys of Stoltze & Updegraff PLC regarding an Iowa restrictive covenant or non-compete matter. We can help.