It is not unusual for employment agreements to contain a non-competition provision which, among other things, prohibits an employee from working for a competitor of the employer. The question then arises regarding whether such provision is enforceable. The recent case of CertainTeed Corporation v. Williams provides excellent guidance regarding the enforceability of such a provision.
Jerome Williams (“Williams”) was employed by CertainTeed Corporation (“CertainTeed”) as a Plant Engineer. When he was promoted to Assistant Plant Manager, Williams was required to execute a Noncompete Employment Agreement (“Noncompete Agreement”). The Noncompete Agreement, among other things, provided as follows:
I [Williams] shall not, without written consent signed by an officer of [CertainTeed], directly or indirectly (whether as owner, partner, consultant, employee or otherwise), at any time during the one year period following termination of my employment with [CertainTeed], [engaging] in or contribut[ing] my knowledge to any work or activity that involves a product, process, apparatus, service or development (i) which is then competitive with or similar to a product, process, apparatus, service or development on which I worked or (ii) with respect to which I had access to Confidential Information while at [CertainTeed] at any time during the period prior to such termination.
In determining whether such provision was enforceable, the court noted that a non-competition provision must protect a legitimate interest of the employer in order to be valid. Protection of trade secrets, confidential information, goodwill and unique or extraordinary skills are legitimate interests supporting such a provision. However, if the provisions are inserted into an agreement for some other purpose, such as eliminating or repressing competition or keeping the employee from competing so that the employer can gain an economic advantage, the covenant will not be enforced.
In ruling the above provision was unenforceable, the court found that the provision prohibited Williams from engaging in any competing business even when that competition did not involve the use of protected information. Thus, the provision was not protecting a legitimate interest of CertainTeed. The court went on to find, however, that the provision could be reformed so that it would be enforceable by striking subpart (i), which would then allow Williams to work for a competitor so long as he refrained from using or disclosing CertainTeed’s protected information.
So long as the non-competition provision protects an employer’s legitimate business interests, and is not a blanket prohibition against working for a competitor, the non-competition provision should be enforceable. This is a constantly changing area of the law. Employers should continuously review their non-competition agreements in view of new case law, and employees should contact us if they have questions about the present enforceability of non-competition agreements entered into sometime ago.