Noncompete agreements are generally unenforceable

Posted by Charles Middleton on 06/21/2017

Q: What are noncompete agreements?

A: A noncompete agreement, in its most basic form, is an agreement that prohibits a former employee from obtaining employment with certain prospective employers. Typically, a noncompete agreement prohibits a former employee from working for a prospective employer that offers the same or similar services or products as the former employer. These restrictions on future employment normally have time (e.g., two years) and geographic (e.g., the state of Oklahoma) limits, meaning a former employee isn't completely removed from the job market in a specific industry. With that said, a noncompete agreement will greatly diminish the pool of prospective employers a former employee can consider.

Q: What is the purpose of a noncompete agreement?

A: Most commonly an employer will present a noncompete agreement to key employees that the employer is concerned will use the skills and information they learned during their employment to help a future employer gain an advantage in the marketplace. The employer is protecting against an employee leaving for greener pastures and creating a competitive advantage for his or her new employer. Put simply, the purpose of a noncompete agreement is to prohibit a former employee from working for a competitor.

Q: Are noncompete agreements enforceable in Oklahoma?

A: The answer to this question in most circumstances is “no.” Unlike other states, Oklahoma has a strong public policy against noncompete agreements, which has been codified by statute, stating “every contract by which any one is restrained from exercising a lawful profession, trade or business of any kind ... is to that extent void.” A noncompete agreement that prohibits a former employee from working for certain prospective employers is an unenforceable restraint of trade in Oklahoma.

There are exceptions to Oklahoma's ban of noncompete agreements. A noncompete agreement can be enforceable in the sale of the goodwill of a business (the seller can agree not to compete with the buyer) and in the dissolution of a partnership (the partners can agree not to carry on a similar business). Even in these circumstances, however, the noncompete agreements must be narrowly drafted not to exceed certain time and geographic limitations.

Despite the fact that noncompete agreements are generally unenforceable in Oklahoma, employers are not without options to limit a former employee's post-employment conduct. An employer can enforce a non-solicitation agreement prohibiting a former employee from soliciting “established customers” and employees or independent contractors of the employer. Specifically, an employer can enter an enforceable agreement that prohibits a former employee from “directly solicit(ing) the sale of goods, services or a combination of goods and services from the established customers of the former employer” and/or from “soliciting, directly or indirectly, actively or inactively, the employees or independent contractors of (the former employer) to become employees or independent contractors of another person or business.”

PAULA BURKES, BUSINESS WRITER

Published The Oklahoman, June 21, 2017