Agreements in Restraint of Trade: What You Need to Know
Agreements in restraint of trade are a type of contract that restricts a person`s ability to work in a certain field or engage in a particular business activity. While these agreements are legal in some cases, they can be subject to challenge and scrutiny.
Types of Agreements in Restraint of Trade
There are several types of agreements in restraint of trade. Non-compete agreements, for example, are contracts that prohibit an employee from working for a direct competitor for a certain period of time after leaving their current position. Non-solicitation agreements are another type of agreement that restricts a person`s ability to solicit clients or customers from a former employer.
Other types of agreements in restraint of trade include customer and supplier agreements, which can include provisions that limit a person`s ability to do business with certain customers or suppliers, as well as franchise agreements, which often contain extensive non-compete provisions.
When Are Agreements in Restraint of Trade Enforceable?
Agreements in restraint of trade are generally enforceable if they protect a legitimate business interest and are considered reasonable in the circumstances. For example, a non-compete agreement that is narrowly tailored to protect a business`s trade secrets or confidential information is more likely to be deemed enforceable.
Courts will often consider factors such as the length of the restriction, the geographic area covered by the agreement, and the scope of the prohibited activities when determining whether an agreement in restraint of trade is reasonable. If an agreement is found to be overly broad or onerous, it may be deemed unenforceable.
Challenges to Agreements in Restraint of Trade
Agreements in restraint of trade can be challenged on various grounds, such as if they violate public policy or if they are deemed overly broad or unreasonable. In some cases, employees may challenge non-compete agreements by arguing that they were coerced or that the agreement is not necessary to protect a legitimate business interest.
In recent years, some states have taken steps to limit the use of non-compete agreements. For example, California bars the use of non-compete agreements for most employees.
The Bottom Line
Agreements in restraint of trade can provide businesses with valuable protection against unfair competition. However, these agreements must be carefully crafted to ensure that they protect legitimate business interests and do not unduly restrict a person`s ability to work or engage in other business activities.
As a copy editor with SEO experience, it is important to note that these agreements can have implications for businesses from an online standpoint as well. Including clear language in these agreements about social media use and online advertising can help protect businesses in the digital age.