Non-Compete Agreements: A Primer on non-compete, non-solicitation and trade secret protection

Companies need to protect their trade secrets, confidential information and intangible property.  Non-compete, non-solicitation and trade secret agreements are important devices which can help increase company protection against misappropriation of trade secrets.  In general:

1. the broader the non-compete clause, the less enforceable it is;
2. the more an employee has access to confidential information or trade secrets, the more enforceable it is;
3. additional compensation paid for a non-compete clause makes a non-compete  more enforceable (although no additional compensation may be necessary at all).

An employer must have a legitimate business interest to protect in order to enforce a non competition agreement, also know as a non-compete.  An employers reasonable competitive business interest must be more than merely competition.  These include protection of trade secrets, proprietary information, and competitive position. Taking insider information by an employee which would lead to an "unfair advantage" to the employee is key.  Unfair advantage, however, is more than just competition.

If the employee does not use the trade secrets but only his general knowledge or things he has learned from experience then a non-compete is subject to attack.

Solicitation of customers is also an issue in many of these cases. Employers often include a contract clause which prohibit the employee from providing services or contacting customers of the employer.  Court are more inclined to enforce non-solicitation clauses than no-contact or no-service clauses.  This is because courts view clauses which take the choice away from the consumer to be anti-trust violations and otherwise anti-competitive. 

The distinction between solicitation and non-solicitation is, at best, somewhat artificial and subjective. Customer letter and phone calls are obviously direct solicitation.  Newspaper advertisements typically are not considered solicitation and leave the customer choice in tact.
.

Comments

[dc]

If I signed a non compete contract but my employer has changed/cut my commission 3 times since I signed it. Will it hold up in court if I were to leave the company?

[Enrico S.]

Generally, if information is publicly available (i.e. can be found with a Google search), then it is not a trade secret. Trade secrets must be private and protected to the company claiming it is a secret.

[tc]

If in a non-compete the geographical scope is not stated is that not considered?

Then in addition to that, the information that could be considered "Trade Secret" can actually be found by surfing the internet would that still be considered a "trade secret"?

[Geographic Scope]

CH: Perhaps. These agreements are always subject to review and always fact specific. The scope of a non-compete agreement can be challenged if it is too broad in its geographic coverage and scope.

[Trade Secret & Insider Information]

Insider information is only protected as a trade secret if it is defined as such by a court of law. Not all information held by a company meets the test of being confidential or a trade secret.

[ch]

If i went to my employeer and asked if working for another franchise in the state would affect my non compete and their response was, depends on where in the state of michigan it its, could I fight this?

[Enrico Schaefer]

Typically, yes. Continued employment is sufficient consideration in many instances. However, without knowing all the facts of your case, it is impossible to say for sure. You should contact an attorney to review the specific facts and circumstances of your situation.

[SH]

Considering MI is an at-will state, can an employer fire me for refusing to sign another non-compete after I already signed one when I hired in? My pay and responsibilities are not changing.