Employers have to accept significant liability whenever they hire new professionals. Companies have to earmark funds to cover their wages and their benefit packages. They have to provide training and safety equipment. Employment contracts play an important role in clarifying responsibilities during an employment relationship.
In addition to talking about wages, disciplinary procedures and performance expectations, employment contracts might also include restrictive covenants. Noncompete agreements, or covenants not to compete, are among the most common restrictive covenants used by employers. Businesses operating in Kentucky may want to prevent workers from using their business relationships or access to trade secrets for the benefit of a competitor.
A noncompete agreement can also prevent people from starting a competing business in the same industry. Noncompete agreements have become somewhat controversial in recent years. There have been attempts to reform laws and even to ban noncompete agreements at the federal level.
Can businesses still enforce non-compete agreements against former employees under federal and Kentucky law?
Kentucky still allows for noncompete enforcement
Only a handful of states have outright prohibited non-compete agreements. Most states simply restrict them by imposing limitations on their use. Kentucky is one of those states. Employers need to ensure that their noncompete agreements are compliant with current legal standards.
The agreement should include limitations regarding the geographic area to which it applies or the duration of the agreement to make it reasonable. The employee making the concessions should receive something of valuable consideration in exchange. Frequently, an offer of employment or a new position with the company after a promotion can constitute that valuable consideration.
The business needs evidence of infringing activity to enforce the agreement. However, provided that the employer has proof that the worker started a directly competing organization or took a similar position with a local competitor, it may be possible to hold the worker accountable for the harm that they caused and their breach of the noncompete agreement.
Many covenants not to compete include penalty clauses that impose a specific financial consequence for breaches. The courts can also award the former employers damages based on the practical impact that the unfair competition has had. Employers can continue integrating noncompete agreements into their contracts in Kentucky and can ask the civil courts to enforce them if they discover that an employee has violated the agreement.
Having support when drafting, reevaluating or enforcing employment contracts can help businesses mitigate losses caused by non-compliant employees. Noncompete agreements can protect a company provided that they are valid and the company acts promptly to enforce them when necessary.