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Court ruling provides example of how industry impacts non-compete agreements

In many industries, it's customary for employers to require employees to sign some sort of non-compete agreement. Such agreements are intended to protect an employer’s business interests, proprietary information and to guard against competition. While, depending on the industry and specific company, non-compete agreements may vary in subject matter and scope; all must meet certain legal requirements.

For example, a valid non-compete agreement should conform to the following legal criteria:

  • Provide an employee with a benefit in exchange for his or her promise to comply. For example, many employers ask that a prospective employee sign a non-compete agreement prior to an offer of employment being extended.
  • Include terms and conditions that are "reasonable in scope, geography and time."
  • Provide for the protection of business interests that are of a legitimate concern to an employer and could, if violated, negatively impact a business.

An appellate ruling in a recent case involving a Chicago-based staffing firm illustrates the role that an employer's industry plays in determining what may or may not be considered valid and enforceable terms of a non-compete agreement. In this case, the staffing firm sued several former employees who left the company and started their own staffing firm.

Included among the claims asserted by the plaintiff, were those alleging that the defendants soliciting business from clients, recruited employees to other jobs and disclosed proprietary information. When ruling in the matter, the appellate court upheld the lower court's ruling agreeing that the plaintiff's "non-solicitation and non-recruitment provisions were unreasonable."

The court's ruling was based largely upon the very nature of the employment staffing business where it's customary for clients to employ the services of several staffing agencies at one time and even to fill the same position. Additionally, the judge noted that companies publicly advertise their open positions on websites and social media sites which refuted the plaintiff's claims related to proprietary information.

Source: Forbes, "The Limits Of Non-Compete Agreements," Adriana Gardella, July 25, 2015

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