The proliferation of the use of non-compete agreements was highlighted in a recent article in the New York Times (see, “How Noncompete Clauses Keep Workers Locked In”, May 13, 2017). The article referenced a survey which concluded that about 20 percent of the American workforce was subject to some form of non-compete clause, and how these agreements are hurting employee mobility. This explains why a number of states, including California and Utah, have banned or limited the use of such agreements, and why other states are considering such legislation.
In Delaware, non-compete agreements are considered restraints on trade, so courts such as the Delaware Court of Chancery will enforce them only if they are “reasonable”. The reasonableness of the restrictions depends upon factors such as the employer’s interest in protecting its business; the scope of the restrictions; the employee’s right to work and earn a living; and the public’s interest in free trade and competition. Below are a number of considerations for businesses to consider when drafting and enforcing non-competes subject to Delaware law.
Ask Yourself – What are You Trying to Protect?