Frequently, when an employee or partner in a business or corporation leaves that corporation, the employer will take the position that the employee is bound by the terms of a non competition agreement previously signed by that employee or partner. The following is a typical non competition clause inserted into employment agreements or partnership agreements:
Typical Non Compete Language
“For a period of two years after John Smith leaves the employment of XYZ Corporation, he will not directly or indirectly engage in any competitive business which includes, but is not limited to: 1) engaging in business as an owner, partner or agent 2) becoming an employee of a business that is engaged in such competition, or 3) soliciting any customer of XYZ Corporation.”
Non Compete Clauses Lawful in Idaho
Such non competition clauses are generally legally valid and enforceable in the state of Idaho, but only under certain conditions. Those limits were spelled out in the Idaho Supreme Court case, Freiburger v. J-U-B Engineers, Inc., decided in 2005.
In the Freiburger case, the Supreme Court held that non competition agreements are disfavored in an employment contract, and will be strictly interpreted against the employer. Moreover, to be enforceable the agreement must be:
1) Not greater than is necessary to protect the employer in some legitimate interests.
2) Is not unduly harsh and oppressive to the employee.
3) Is not injurious to the public.
In so ruling, the Court was echoing the language of Idaho Code § 44-2701, which states:
“A key employee or key independent contractor may enter into a written agreement or covenant that protects the employer's legitimate business interests and prohibits the key employee or key independent contractor from engaging in employment or a line of business that is in direct competition with the employer's business after termination of employment, and the same shall be enforceable, if the agreement or covenant is reasonable as to its duration, geographical area, type of employment or line of business, and does not impose a greater restraint than is reasonably necessary to protect the employer's legitimate business interests.”
But note – this statute only applies to “key employees.”
Bottom line – If a prospective employer asks that you sign a non competition agreement, please understand that the agreement may be enforceable in a court of law.