Non-competition agreements, also known as covenants not to compete or restrictive covenants, are employment contracts used by employers to limit the ability of an employee to compete with the employer by stealing customers or trade secrets. Enforceable agreements must strike a balance between protecting the employer’s legitimate business interests from an unfair competitive advantage with the employee’s right to work in a field for which he or she is trained.  In general, courts decide what is considered reasonable or not reasonable by examining the type and size of the business, how long and over what geographic area the restrictions apply and whether adequate consideration, or benefit, was given the employee at the time the agreement was signed.

The Law In Oklahoma

Oklahoma law permits former employees to work in the same or similar business as their former employers as long as they do not directly solicit business from established customers of the former employer. Factors considered when determining reasonableness include the hardship an agreement puts on the former employee, its effect on the general public and the restrictions placed on time, territory and activity of the former employee.

Consideration

With any contractual arrangement, both parties must be giving and receiving something of value, also known as consideration. Oklahoma law provides in general, that the existence of consideration is presumed if there is a written agreement but the courts have not addressed this issued specifically with regard to non-competition agreements.

Reasonableness in Time and Geographic Scope

Agreements may be deemed unenforceable if a court finds that they are unreasonable in terms of duration, geographic scope and the type of employment or line of business being restricted. If a court finds an agreement is unreasonable, it may modify the agreement so that it does not unduly infringe on the former employee’s ability to work.

Examples of non-compete agreements that Oklahoma courts have found to be reasonable include:

• A 1-year restriction against a physician from actively soliciting patients from his former employer unless the patient specifically asked for the particular physician.
• A 2-year restriction against a speech/language pathologist from contracting with, for or by any client of the former employer.
• A 9-month restriction against an account manager from “soliciting or diverting” clients of a temporary employment agency.

The courts have found the following restrictive covenants unreasonable:

• A 2-year, 20-mile radius restriction against a physician which effectively barred him from practicing within 100 miles of the city in which he resided.
• A 3-year restriction against a former general manager of a funeral home.
• A 10- year restriction without a geographic limitation against a real estate broker.

Employers need to keep these issues in mind when asking employees to sign restrictive covenants. It is also important to know if potential new hires have a non-compete agreement with a former employer. In some cases, the new employer can be liable to the former employer if hiring the employee would put him or her in violation of the agreement. Different rules may apply to situations in which all or part of a business is being sold and a restrictive covenant is agreed to by the buyer and the seller.