Non-compete covenants are often used by businesses that want to keep confidential business information out of the hands of their competitors. Unfortunately, some employers may make their non-compete agreements overly broad and unenforceable, which could lead to the dissemination of trade secrets. If you need assistance drafting a non-compete covenant for your business, contact an experienced Fayetteville contract dispute lawyer today. At Gunn Kieklak Dennis, LLP, our firm is dedicated to providing your business with the unique legal representation necessary to handle your legal issues. Gunn Kieklak Dennis, LLP is here to explain what should be included in a non-compete agreement in Arkansas.
Arkansas Non-Compete Agreement Laws
Non-compete agreements are used to prevent former employees of a company from taking their knowledge of a certain company’s practices to utilize as an employee for a competitor. Businesses use non-compete agreements to protect a number of items like trade secrets, client lists, manufacturing processes, and to prevent the exposure of other intellectual property. Failing to have a non-compete agreement could be the difference of having a valid intellectual property infringement claim against a former employee or their employer.
One of the most common issues with non-compete covenants is drafting a contract that is considered enforceable. Generally, a non-compete covenant is deemed unenforceable based on the impact it has on an employee and a company’s interest in keeping their secrets safe from competitors. For example, barring an employee for working for a company that only has offices six states away from the employee’s residence can be seen as overly broad.
Not every non-compete agreement will have clauses that are easy to identify as overly broad or reasonable. As a result, this can leave businesses wondering whether a contract is enforceable and also leave former employees with fear of being held civilly liable for misinterpreting contractual terms.
Arkansas law states that a non-compete agreement will be enforceable if it is supplementary to an employment contract and it addresses the following issues:
- A company’s interest in protecting intellectual property, goodwill earned with customers, trade secrets, profit margins, and other valuable knowledge the company entrusted to an employee but wants kept secret from a competitor
- The non-compete clause does not include unreasonable restrictions that are unnecessary to protect business secrets, and that would place a heavy burden on a former employee
A non-compete clause that goes beyond these particular factors could easily become the subject of litigation and possibly be declared invalid by an Arkansas court. To learn more about non-compete clauses in Arkansas, continue reading and speak with an experienced Arkansas commercial litigation lawyer.
Necessary Elements of a Non-Compete Clause
When determining the validity of a non-compete clause, two important factors must be examined: consideration and the reasonableness in time and geographic scope. If a court finds that a non-compete clause does not contain consideration or is not reasonable in its terms, the contract could be invalidated.
To create a valid contract, there must be some value in the contract for all parties, this basic give, and take of goods or services is known as consideration. Arkansas law states that consideration needed for a non-compete agreement is satisfied when a person is offered employment or if an employee is offered the prospect of continued employment at a company. Consideration could also come in the form of benefits to an employee once they depart a company in exchange for their promise not to work for a competitor.
Time and geographic scope deal with the types of restrictions placed on a former employee. In Arkansas, a two-year restriction on working for a competitor is considered as a reasonable amount of time for a non-compete clause. However, if two years of restricted employment is too much to meet the interests of an employer, there is a possibility that the contract could be invalidated.
When determining the geographic scope of a non-compete agreement, employers must look at the burden an employee may face by driving dozens of miles to find a job they can apply for.
It is also important to note Arkansas is still developing laws regarding the enforceability of non-compete agreements. For example, a recent decision in Arkansas courts may allow employers to extend the length of a non-compete agreement despite whether the time constraints of the contract expired. However, an employer should not assume that a court will always intervene to alter the terms of a non-compete agreement.
Work with Our Arkansas Business Dispute Attorneys Today
If you require an enforceable non-compete agreement for your business, consult with an experienced Arkansas business dispute attorney today. The legal team at Gunn Kieklak Dennis, LLP possesses decades of combined legal experience, and we would be proud to work with you. Drafting an enforceable non-compete covenant in Arkansas is a meticulous process, and our firm is up to the task. To schedule a confidential legal consultation, contact Gunn Kieklak Dennis, LLP at (479) 717-9068, or contact us online.