A Kentucky Non-Compete Agreement is used by employers to prevent workers from taking employment with a competitor or setting up a competing firm for some time after leaving work.
Non-compete agreements are allowed in Kentucky, and courts will enforce clauses reasonably drawn to protect the employer’s interest and secure employees’ right to pursue work in an open labor market.
Reasonable Uses and Objections
- Enforceable when terminated without cause? – Yes, under some circumstances.
- Employee non-solicitation agreement permitted? – Yes.
- Customer non-solicitation agreements permitted? – Yes.
- Does continuing employment equal sufficient consideration? – No, continuing employment does not provide adequate consideration for a non-compete agreement. Additional considerations, such as investment in training or other economic advantages, are necessary.
- Statute of Limitations for Breach of Contract: 15 years.
Legally Enforceable in Kentucky?
The Kentucky courts have held that a non-compete agreement must be reasonable in scope and purpose. The courts will analyze “reasonableness” by examining the duration of the contract, the geographical restriction of the agreement, and the purpose of the restriction.
Any agreement must be drawn in such a way as to protect the employer’s legitimate interests without placing an undue burden on the employee’s ability to seek work or the public interest in having a competitive and free economy. Kentucky courts are not opposed to non-compete agreements and will uphold them unless “very serious iniquities would result,” as per Gardner Denver Drum LLC v. Peter Goodier and Tuthill Vacuum and Blower Systems (U.S. District Ky., 2006).
Kentucky courts routinely uphold time limitations varying from six months to two years. If an employer can show a unique situation or interest, a longer duration might be justified.
Geographical limitations must not be unlimited in scope. A non-solicitation agreement, preventing the use of customer lists or solicitation of customers, can be geographically unlimited. Generally, broader geographical limitations are harder to justify.
Kentucky courts have ruled that non-compete agreements are assignable. That means that when an existing business is sold, the purchaser also acquires the non-compete agreements entered into by the business employees.
Non-compete agreements entered into when an employee begins employment are deemed to have sufficient consideration through the actual start of employment. If an employer wishes to impose a non-compete agreement on an employee after the start of employment, some additional consideration other than continued employment is necessary.
This consideration could include additional training, improved benefits, cash or monetary compensation, promotion, or a promise of job protection.
Download a Kentucky Non-Compete Agreement template in PDF or Word format below: