We need to reset the way we consider non-compete duration and scope. Instead of conceptualizing the duration of a non-compete in terms of “how long” the better approach is “how short.” The same is true for the subject matter of the non-compete – make it narrow. What is the objective of a well written non-compete? To draft it in such a way that a departing employee will abide by it without legal intervention. Now if a lawsuit is necessary, the objective is for the court to enforce the non-compete as written. This rarely happens because of drafting mistakes.
The unfortunate thing is businesses often times don’t consider non-compete terms until the time of enforcement. Instead of putting in a little more time and money up front, we generally spend the time and money actually considering non-compete terms at the time of enforcement, years after the non-compete is prepared. Discussions between lawyer and client at the time of drafting about the length of a non-compete may go like this:
Client: What do Texas courts say about the length of a non-compete?
Lawyer: It’s always dependent upon the circumstance, but Texas courts have enforced them between a year and 2 years.
Client: Well if we can get two years let’s go for two years.
The client’s approach makes practical sense, but in terms of actual enforcement it does not. In situations where there are multiple individuals who are subject to the same non-compete, having a non-compete “busted” or modified can have dramatic consequences. The same rationale applies to the scope of the non-compete:
Client: We do business throughout the United States? Can we put in a US wide non-compete?
Lawyer: In some circumstances courts have upheld nationwide non-competes but no situation is the same.
Client: Well, let’s go as broad as possible.
This is the wrong approach. There are a number of audiences that a non-compete will be considered by: (1) employees; (2) the lawyer for a departing employee; (3) the judge; and (4) appellate courts. I have been a party to numerous discussions between employees who have left or are considering leaving in the face of a non-compete. A narrowly tailored non-compete that has been thought through can be intimidating. Why? Because a non-compete that avoids fluff, e.g. too long and overly broad, eliminates the position that the agreement should be narrowed by the court. If the time/scope argument is taken out of the equation, the employer is in a much better position to enforce and looks reasonable to the judge. That means the lawyer providing advice to the departing employee has less to argue. Spend some time considering your non-compete terms, the objective is to enforce it as written, not to have it rewritten by the court.
