Non-compete provisions are often found in the employment setting or in the sale of business agreement. Generally the employee or the seller agrees not to engage in a competing trade or business typically within a described geographic area and for a prescribed period of time.
It is also common for a non-compete provision to include an agreement not to disclose confidential or trade secrets of the company to third parties as well as an agreement not to solicit or contact any customers of the company for a specific period of time after termination of employment or sale of a business.
The company uses non-compete provisions as a way to protect the valuable proprietary and confidential information and trade secrets of the company which include the good will of the business, its reputation and customer relations.
There are strong incentives of a company to protect its intellectual property whether it be customer lists, discoveries and inventions, works and writings, software, logos, trademarks, financial information and other proprietary and confidential information of the company. However, these strong incentives bump up against the public policies of the state regarding non-compete provisions and the interpretation of those provisions by the courts. In the employer-employee setting, this means that restrictive covenants are disfavored and there is a general judicial bias regarding the overall enforceability of such covenants rather than the hard and fast rule of the contract language per se.
Lat J. Celmins