It’s common for an employer to rely on a non-compete agreement to protect his or her business from unfair competition following the departure of a key employee. The Kentucky Court of Appeals, through Charles T. Creech Inc. v. Brown, recently provided meaningful guidance concerning whether those agreements are enforceable.
First, the Court clarified that courts are authorized to modify any provision in an agreement if doing so will save an otherwise unenforceable agreement. In other words, if the agreement fails to contain a geographic limitation, the court is free to establish a reasonable geographical limitation.
More significantly, the Court held that erecting “bright-line rules” to determine whether an agreement is enforceable would be “futile” and that a lower court’s inquiry into the reasonableness of a non-compete agreement requires “case-specific flexibility.” To guide this inquiry, the Court identified six factors to consider:
Consideration of these factors will give employers and their counsel guidance when drafting new non-compete agreements, when modifying existing agreements, and when determining whether to pursue the enforcement of an agreement upon the departure of an employee.