Given the importance of non-compete obligations and other restrictive agreements for the protection of a company`s key assets – customers, employees and intellectual property – this is a situation in which regular “review” with legal counsel may be necessary. In short, the applicability of the Non-Competition Act continues to evolve in Kentucky. If your company has not reviewed its non-compete obligations with legal counsel, or if you are concerned about the applicability of your company`s non-compete obligations, the lawyers at Commonwealth Counsel Group will be happy to speak to you. The enforceability of a non-compete obligation may also depend on the nature of the sector. Some industries are much more open than others when it comes to sharing information, making them less suited to restrictions on poaching bans or non-disclosure agreements. For assistance with non-compete obligations, labour disputes or employment law issues, please contact Ziegler & Schneider today at (859) 426-1300. Non-compete obligations are generally not favoured by the courts. In fact, some states, such as California, have passed laws that effectively prohibit the use of non-compete obligations. How do I know if my company`s non-compete obligation is vulnerable? Employers who want their employees to sign a non-compete agreement or any other type of restrictive agreement, such as.

Whether it is a confidentiality or non-disclosure agreement, or a non-consolidation agreement, are invited to discuss the specific terms and language with experienced legal counsel. This process requires a deep dive into the legitimate interests of an employer and finding the most effective and sometimes creative way to protect those interests in the narrowest possible way. Because if the non-competition agreement does not stand in court, it is not worth the paper on which it is written. Clearly, agreements under Kentucky`s non-compete laws that lose employees can discourage them from losing their confidential business information as well. Every company wants to prevent employees with access to sensitive information or trade secrets from passing it on to their competitors. The Court conducted a detailed analysis of the two cases mentioned by Creech, Higdon Food Service, Inc.c. Walker, 641 S.W.2d 750 (Ky. 1982) and Central Adjustment Bureau, Inc.c.

Ingram Associates, Inc., 622 S.W.2d 681 (Ky. App. 1981). The Court distinguished between these two cases, holding that the “common denominator” between Higdon and Central was that after the signing of the non-compete obligation, “the employment relationship between the parties has changed”. Creech, 433 P.W.3d to 354. In this case, however, the court found that Brown`s employment relationship with Creech had stagnated after the agreement was signed and for the remaining two years with the company. Brown remained an all-you-can-eat employee, and he received no bonuses, promotions, salary increases, or special training. “In short,” the court concluded, “Brown did not receive any consideration from Creech in exchange for signing the agreement or after signing the agreement.

Therefore, the agreement is unenforceable. Creech, 433 P.W.3d to 354. Kentucky law requires that non-compete obligations be appropriate. The suitability requirement applies to three aspects of the restriction: In its Creech decision, the Kentucky Supreme Court concluded that this is a different case if a non-compete obligation is accompanied by such a change in the employment relationship. This applies regardless of whether the non-compete obligation is structured as an independent agreement or within the framework of an existing contract. Non-compete obligations are unenforceable in California, where a law prohibits them, except in very limited and rare cases in which judges will not apply them to former employees. However, California employers can use non-isolation and non-disclosure agreements to protect their trade secrets, customer lists, and sensitive data from disclosure when employees leave with access to them. As with any other contract, a valid non-compete obligation must be taken into account. In Kentucky, if the non-compete obligation is entered into at the time the employee is hired, the employment itself is recognized as sufficient consideration to establish a binding contract.

If an employee is asked to sign a non-compete obligation after being hired, this may also be enforceable if the employer proves that it provided the employee with additional consideration. It is important to note that the consideration is not just a monetary value and may include other benefits or special training that the employee has received that he or she would not have received without the work for the employer. In creech, the key question is whether your company`s employees received something valuable in exchange for signing a non-compete clause. Many employers already meet this criterion because they offer their employees one or more concrete benefits in exchange for their agreements, either at the time of signing or shortly after: hiring in a new position, additional remuneration, promotion, obligation to provide additional or specialized training, protection of the workplace, etc. Kentucky does not have a blanket ban on non-compete obligations. The applicability of such a contract depends entirely on its terms and the nature of the transaction. Kentucky courts have reviewed many such contracts and established rules for their enforcement. The first criterion of applicability is whether the parties have exchanged valuables.

The items exchanged are called “counterparty”. If an agreement is not supported by a mutual exchange of counterparties, it is not enforceable. The courts have held that an initial or continuing offer of employment provides sufficient consideration to support a non-compete obligation. A non-compete obligation or non-compete clause in an employment contract prevents an employee from engaging in particular competitive business conduct and may include a prohibition on disclosing information to third parties, regardless of their competitive status. Non-compete obligations may be valid during and after separation from the employer. Non-compete obligations generally prevent the employee from working for another employer within the same industry for a certain period of time in a defined geographic area for a certain period of time. Other restrictive conditions are possible, such as .B. disclosure of trade secrets and the request of customers, patients or employees of the employer. In the future, employers would be well advised to review their existing non-compete obligations to ensure that Creech`s participation is not a problem if they need the assistance of a court to enforce their rights. A second important condition is that the conditions of the non-compete obligation are proportionate taking into account the duration of the prohibition, the nature of the information protected and the geographical scope and duration of the prohibition of other employment. In general, courts have held that a non-compete obligation must not unduly affect the former employee`s ability to seek and accept employment. A Kentucky court struck down a non-compete clause between a laundry and one of its drivers because the agreement had no fixed duration or restrictions on the area to which it applied.

What does Kentucky`s law say about non-compete obligations? In a landmark 2014 decision, the Kentucky Supreme Court clarified the non-compete law in a case called Charles T. Creech, Inc. v. Brown. The main Kentucky Supreme Court case before us in this regard is Charles T. Creech, Inc. v. Brown, 433 S.W.3d 345 (Ky. 2014) in 2014, in which Creech, a company that supplied hay to farms, asked its employee Brown to sign a stand-alone non-compete agreement after years of employment. The Kentucky Supreme Court ruled that the agreement was not supported by proper review. Kentucky courts have always interpreted strictly non-compete obligations under employee law against employers and in favor of employees. This means that any ambiguity or other issue in a non-compete agreement will be resolved in favor of the employee.

For this reason, it has always been important for Kentucky employers to pay special attention when drafting non-compete clauses. That`s even more true today, following a Kentucky Supreme Court case in 2014 that significantly changed the non-compete requirements for Kentucky workers. In Charles T. Creech, Inc.c. Brown, 433 S.W.3d 345 (Ky. 2014), the Court held that “maintaining employment” was no longer an appropriate consideration for workers who are required to sign non-compete obligations. The case marks a significant change from Kentucky`s previous jurisprudence. Overall, these agreements must be entered into in good faith. Employers cannot use non-compete obligations to exploit an employee or gain an unfair advantage in the marketplace. If an employee resigns with access to the employer`s trade secrets, whether by voluntary dismissal or involuntary dismissal, this information may accompany the former employee at the expense of the former employer. The former employee may start a competing business or work for a competitor and reveal the secrets of the former employer`s success.

A properly drafted agreement under Kentucky`s non-compete clause can prevent this unfortunate development for the former employer. If a court finds that a non-compete obligation is inappropriate in its performance, it retains the power to modify an existing non-compete obligation so that its restrictions are not excessively broad or burdensome for the employee. This is called the “blue pencil” rule. The Creech decision could affect a Kentucky employer`s ability to enforce non-compete obligations, non-solicitation, and similar agreements signed by its current and former employees. Until now, an employee`s agreement not to compete with his employer was considered valid, binding and enforceable as long as its terms were adequately adapted to protect the employer`s legitimate business interests – rather than comprehensively and possibly excessively restricting the employee`s freedom to earn a living. .