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What are the limitations of a non-compete agreement

On Behalf of | Jun 17, 2021 | Employment

Non-compete agreements are extremely common and often appear in a new employee contract. Both the employee and the employer need to know their purpose and their limitations.

In the state of Kentucky, “non-compete agreements are typically enforceable against an employee if they are justified by a legitimate business interest and are limited in scope to protect the legitimate business interest in: duration, geographic reach, and scope of activity.”

But what does that exactly mean and who defines what is limited in scope?

Essentially, the state of Kentucky defines this scope as “such without covenant the employee would gain an unfair advantage in future competition with the employer.”

Let us take a look at duration, geographic reach and scope of activity a little closer.

  • Duration: The duration of a non-compete will vary from industry to industry depending on the type of business, whether there are trade secrets involved, and how much the employer has invested into an employee in terms of trade education.

However, common non-compete durations range from six months to one year. Ultimately, it would be up to a judge to determine what is a reasonable amount of time for the non-compete to stand as enforceable.

  • Geographic Reach: Again, this varies from business to business. An agreement that restricts employees from competing near and around a company’s headquarters would be enforceable where a worldwide, or countrywide restriction would no be enforceable.
  • Scope of Activity: The scope of activity is a little harder to define. However, if an employee has a certain skill set and your employer wants you not to use that skill set for any competitors, that may be reasonable.

However, if the employer restricts the employee from using their skill set with anyone else, that would be unreasonable.

Again, whether a non-compete is reasonable and enforceable can only be determined by a judge. If as an employer or an employee you have any concern, you are encouraged to seek guidance to clarify any doubts you may have.