Time and Geography Terms in a Non-Compete – Are They Reasonable Restraints on Your Ability to Make a Living? (Part 2 of 3)
In Part 1 of this series, I raised the question of whether your non-compete was “over the top,” and asked whether a former employer may have artificially or thoughtlessly inflated the time and geographic limits in your non-compete.
Time and geographical limitations must be based on your employer’s reasonable, protectable business interest. Even if a court were to hold that the employer had a protectable business interest and enforceable non-compete, you still have the ability to question the time and geographic terms of the restriction.
By way of example, a non-compete may say something like this: “the employee is prohibited from engaging in any competitive activities with the employer in the Commonwealth of Pennsylvania for a period of two (2) years.”
What kind of thought went into these time and geographical parameters? Do they have anything to do with your situation? For most employers, employment contracts, while, initially, thoughtfully considered and drafted, soon become standard forms for all executives regardless of the executive’s employment situation. Because not all executives are the same, there must be something more to these time and geographical terms other than “it has worked in the past for a different employee.”
Consider the two-year limitation in our example. So many times in litigation, the best an attorney can say to justify the time period is that the two year period was found to be acceptable in a prior case, so it must be reasonable and enforceable in this one.
Much more needs to be taken into consideration by the Court, however, to decide whether two years is a necessary restrictive period for your case. You might question why the employer needs two full years to get on an even footing to compete with the departed executive. You might argue that the two-year period is punitive and only fixed to eliminate you for two years, which is not a legal basis for a non-compete. Two years may have been the right fit in a prior case, but may not be an appropriate time period in yours.
The same holds true for geographic limitations. If your company has, as in our example, prohibited competition in the entire Commonwealth of Pennsylvania, but the company has only focused its efforts in the eastern part of Pennsylvania, what is the point of a restriction over the entire Commonwealth?
The reason these considerations are so important is because of a technique that a court can employ called “blue lining” (or “blue penciling”). This means the court can take the time and geographic limitations contained in your non-compete and adjust them to more reasonable limitations based on the facts found at a hearing or trial. If the court believed that your former employer did not need two years to replace you and train the new hire, it can lop off time from your period of restriction. And, if the court saw no efforts by the employer to work in the middle or western part of Pennsylvania, they may confine the area of non-competition to the eastern part.
The above analysis does not give you the ability to completely avoid your non-compete. However, if you believe your non-compete is “over the top,” it may be wise to go to court or enter into negotiations with your former employer to reduce the time and geographic restrictions contained in your non-compete. If you do not raise the reasonableness issue, you may be unnecessarily harming your career or passing up a good job opportunity.