Non-Compete Agreements and Trade Secrets

Non-Compete Agreements in Iowa and Illinois

The Agreements with employees, consultants and others are legal, but are strictly construed because they are a restraint against  trade.

 

To maintain a successful business, employers try to protect certain proprietary information of the company and to guard against unfair competition. Therefore, employers may require employees to sign a non-compete or restrictive covenant agreement. In Iowa and Illinois, non-compete agreements are generally enforceable if they are found necessary to protect an employer's business', and are not unreasonably restrictive and are not prejudicial to public interest.

Necessity to Protect

If an employer stands to lose customers as a direct result of a relationship formed between the employee and the employer's customers, a covenant not to compete may be ‘necessary' to protect the employers business. This is found in a circumstance where an employee leaves a company and lures his or her customers from the previous employer over to a competing business. This is particularly apparent in a sales environment, where a salesman has control over customer relationships.

A non-compete might also prove ‘necessary' in situations where an employee has received extensive, specialized and, oftentimes, costly training from an employer and then uses the benefit of the training to compete against the employer. This could be particularly egregious if an employee does not continue with an employer shortly after receiving the training, choosing to compete in a similar business instead.

Reasonable Restrictions 

An employer may want to protect his business from an employee using personal knowledge or training provided to the employee and later who wants to compete against the employer. The employer may also want to protect his customers from being taken. The employee may therefore be asked to sign an agreement not to compete during employment and to continue after leaving the company. This is to protect the Employers interest and the education and connection the employer gave to the employee. The employer cannot preclude a terminated employee from making a living, at least not indefinitely. The law requires that any agreement be reasonable in scope and duration.

 
Reasonableness depends on balancing an employers potential benefit against the hardship to the employee. An employer will not likely be able to keep the ex-employee from competing across the globe, but will likely be able to restrict activity in a geographic area such as an employee's previous sales territory and for a reasonable period of time (perhaps 2-3 years) . The agreement cannot limit the employee from competing in that area indefinitely. The amount of restricted time must also be reasonable. In Illinois specific payment of some property or money needs to be  paid by the employer for the non-compete agreement to be effective. In Iowa, a continuation of the employment alone is enough consideration for the agreement.
 

Iowa and Illinois have adopted the partial enforcement doctrine in response to overly restrictive covenants. The court has the power to enforce a covenant to the reasonable extent. This blue-lining, as it is referred to in some states, allows the court to enforce a non-compete to a reasonable degree with regard to factors such as geographic scope or time it will be enforced.

Be Proactive

If , as an Employee, you have accepted employment from and Iowa company and are asked to sign a non-compete agreement, or if you as the Employer want a key employee to sign a non-compete,  it is advisable to work with an experienced attorney to ensure the agreement is reasonable, fair and acceptable before signing. 

If you have left your employer , and as an employer, a key employee has been terminated, enforcement of the non-compete will be critical to both the employee and the employer. You will want to know that the agreement is unreasonable. 

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