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What Is a Non-compete Agreement?

What Is a Non-compete Agreement?

The Basics Of Non-Compete Agreements

If you own a business, and you have employees, sooner or later you’re going to experience turnover. As you might expect, people who leave your employ tend to move on to work for companies within your same industry. So how do you prevent former employees from divulging all your secrets to their new employer? This is where the non-compete agreement comes in.

In Arkansas, non-compete agreements are also known as “covenants not to compete.” Whatever you choose to call them, non-competes are contracts used by employers to restrict former employees from sharing the employer’s information, such as accounts, customer lists, trade secrets, and more with competitors.

Employees – especially executives, sales staff, and members of the management team – have access to sensitive details regarding a company’s customers, revenue, and other important details. To be enforceable in Arkansas, a non-compete must:

Be Geographically Reasonable

The non-compete agreement can’t prevent an employee from earning a living. If the agreement attempts to restrict the employee from working within an overly broad region (or the entire state), the court will likely rule it invalid. The employer must be able to provide sound justification for the terms of the non-compete, including its reasons for limiting an employee to a certain area.

Be Limited In Duration

As you might expect, non-compete agreements that impose a very lengthy duration are more likely to fail in court. Overall, the agreement must be reasonable in the time frame it imposes.

Serve A Legitimate Business Interest

Employers can’t try to stop former employees from working for competitors (or competing themselves) for no reason other than a basic desire to eliminate competition. The non-compete agreement must state what business interests are a stake – and do so with enough specificity to pass the court’s muster.

Enforceable Non-Compete Agreements Are Narrowly Tailored

Because every non-compete agreement is different, courts examine them on a case by case basis. Generally, a well-crafted and narrowly tailored non-compete agreement is far more likely to hold up in court than an overly broad contract that unnecessarily restricts employees. It’s important to remember that Arkansas courts won’t salvage an agreement if they find one or two sentences invalid. If the court rules that a portion of your non-compete agreement is invalid but holds that the rest of the agreement is acceptable, the entire agreement is invalid.