Non-competition agreements, also known as non-compete agreements or restrictive covenants, are contracts that restrict an employee's ability to work for a competitor or start a competing business for a specified period after leaving their current employer. These agreements have become increasingly common in many states, and Kentucky is no exception.
In Kentucky, non-compete agreements are generally enforceable if they are reasonable in scope, duration, and geographic area. However, there are certain limitations and requirements that employers must follow to ensure that their non-compete agreements are legally enforceable.
Scope of the Agreement:
The scope of a non-compete agreement refers to the type of activities that are prohibited. For instance, a non-compete agreement can restrict an employee from engaging in the same type of work or services as their current employer or prohibit them from working for a specific competitor.
Under Kentucky law, the scope of a non-compete agreement must be reasonable in relation to the employer's legitimate business interests. The agreement must protect the employer from unfair competition while not unduly burdening the employee's ability to earn a living.
Duration of the Agreement:
The duration of a non-compete agreement refers to the length of time the agreement remains in effect after the employee leaves their current employer. In Kentucky, non-compete agreements can generally last for up to two years.
The length of time must be reasonable and necessary to protect the employer's legitimate business interests. For instance, a non-compete agreement for a low-level employee may only be enforceable for a few months, whereas a senior executive's non-compete agreement may last up to two years.
Geographic Area of the Agreement:
The geographic area of a non-compete agreement refers to the region or territory where the employee is prohibited from working for a competitor. In Kentucky, the geographic area must also be reasonable and necessary to protect the employer's legitimate business interests.
For instance, a non-compete agreement that restricts an employee from working for a competitor in the entire state of Kentucky may be too broad, whereas a restriction on a specific region or city may be reasonable.
Consideration for the Agreement:
To be legally enforceable, a non-compete agreement must be supported by valid consideration. This means that the employee must receive something of value in exchange for agreeing to the non-compete agreement, such as a job offer, a promotion, or additional compensation.
If an employee signs a non-compete agreement after they have been hired, the employer must offer additional consideration, such as a raise or bonus, to make the agreement enforceable.
Conclusion:
Non-compete agreements can be a useful tool for employers to protect their business interests, but they must be reasonable in scope, duration, and geographic area. If you're an employer in Kentucky, it's essential to consult with an experienced employment law attorney to draft a legally enforceable non-compete agreement.
If you're an employee who has been asked to sign a non-compete agreement, it's crucial to review the agreement carefully and seek legal advice before signing. An attorney can help you understand your rights and negotiate more favorable terms.