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:
- the broader the non-compete clause, the less enforceable it is;
- the more an employee has access to confidential information or trade secrets, the more enforceable it is;
- 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.