Kentucky employers use a number of legal devices to protect their proprietary information. One of the most common devices is a covenant not to compete. If enforceable, a non-compete agreement limits the ability of an ex-employee to accept employment from a competitor or to start a competing business from scratch. The enforceability of such agreements is critically important to both employers and employees.
Kentucky does not have an across-the-board ban on non-compete agreements. The enforceability of any such contract depends entirely on its terms and the nature of the business. Kentucky courts have reviewed many such contracts and have established rules for their enforcement. The first test of enforceability is whether the parties have exchanged items of value. The items exchanged are known as “consideration.” If an agreement is not supported by a mutual exchange of consideration, it is not enforceable. The courts have ruled that an offer of initial or continued employment provides sufficient consideration to support a non-compete agreement.
A second important requirement is that the terms of the non-compete agreement be reasonable given the length of the prohibition, the nature of the information that is protected, and the geographic reach and duration of the prohibition on other employment. In general, courts have ruled that a non-compete agreement may not unduly infringe on the former employee’s ability to seek and accept employment. A Kentucky court invalidated a non-compete agreement between a laundry service and one of its drivers because the agreement had no fixed duration or limits on the territory to which it applied.
Anyone who has been asked by a prospective employer to sign a non-compete agreement may wish to consult an experienced employment attorney for advice. A knowledgeable lawyer can offer advice on whether and to what extent the agreement is enforceable. Also, a capable attorney can provide a professional opinion about the circumstances under which the contract may be enforceable.