A non-compete agreement is a legal tool between employees and employers. They state limitations on jobs that the employee may accept during employment or after leaving the employer. For example, a non-compete could prevent an employee from taking a job with a competitor or a role in which the employee could benefit from using sensitive data or information.
Non-competes are powerful tools to protect a business’s interests. However, non-competes aren’t always enforceable. The non-compete must fall within the rules and guidelines of the state in which the employee resides. Some states allow a wide range of non-compete agreements. Others are stricter about what can and cannot be in an agreement.
Iowa generally allows non-competes in specific situations and instances. For the most part, Iowa courts prefer non-compete agreements that are narrow in scope and are not unreasonably broad and restrictive. The agreement should specifically protect the business’s interests while still allowing the employee opportunities to continue their career. Below is a guide to what is and is not enforceable in Iowa.
Is a Non-Compete Legally Enforceable in Iowa?
Non-compete agreements in Iowa are legally enforceable, but there are limits on what can be enforced. Below are the instances in which a non-compete is and is not allowed.
What’s Protected?
The following items can be protected with a non-compete agreement in Iowa:
- Trade secrets
- Goodwill
- Special training or peculiar knowledge that would unjustly enrich an employee at the expense of the former employer.
Reasonable Use and Exceptions
Iowa has several defined reasonable uses and exceptions for non-compete agreements in the state.
The reasonable uses include:
- Whether the restriction is reasonably necessary to protect the employer’s business, unreasonably restrictive (time and space), and prejudicial to the public interest.
Exceptions to non-compete agreements in Iowa include:
- Franchisees
- Healthcare employment agency workers
Non-Compete Iowa Limitations
Limitations on Time
Iowa law does not state a specific allowable duration for a non-compete agreement. However, Iowa courts have generally found that agreements between one to three years in duration are within reason and are enforceable. Contracts that are longer than three years could be struck down and ruled to be unenforceable.
Non-compete Agreement Iowa Geographic Limitations
Again, Iowa law does not specifically state geographic limitation rules on non-compete agreements. However, Iowa courts have ruled that broad contracts with large geographic limitations are not enforceable.
Contracts that prevent future employment in a large area of land, like the entire state, may not be enforceable if challenged. It’s advisable to limit geographic clauses to be as narrow as possible. It may be wiser to focus on client and customer relationships rather than making an agreement that covers a specific territory.
- Enforceable when terminated without cause? Yes
- Employee non-solicitation agreement permitted? Yes
- Customer non-solicitation agreements permitted? Yes
- Does continue employment equal sufficient consideration? Yes
Iowa Non-Compete Agreement Sample
Download an Iowa non-compete agreement template here:
