Employers or businesses often use non-compete agreements to prevent workers from taking employment with a competitor or setting up a competing firm for a period of time after leaving work. Non-compete agreements are allowed in Kentucky. Courts will enforce non-compete agreements that are reasonably drawn to protect the interest of the employer, and in securing the right of employees to pursue work in an open labor market.
Is a Non-Compete Agreement 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 agreement, 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 averse to non-compete agreements, and will uphold them unless “very serious iniquities would result.” [1]
What can be protected?
In Kentucky, a non-compete agreement can be used to protect confidential business information, as well as customer information and lists. It can also be used to protect prior investment in employee training, and prevent unfair competition, by restricting the ability of workers to work for competitors for a period of time after leaving employment.
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, by itself, continuing employment does not provide sufficient consideration for a non-compete agreement. Additional consideration, such as investment in training, or other economic advantages are necessary.
- Statute of Limitations for Breach of Contract: 15 years
Kentucky Non-Compete Limitations:
Time limitations:
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.
Non-Compete Kentucky geographical limitations:
Geographical limitations must not be unlimited in scope. Generally, wider geographical limitations are harder to justify. A non-solicitation agreement, preventing the use of customer lists or solicitation of customers, can be geographically unlimited.
Other limitations:
Kentucky courts have ruled that non-compete agreements are assignable. That means that when an existing business is sold, the purchaser of the business also acquires the non-compete agreements entered into by the employees of the business.
Non-compete agreements entered into at the time 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 take the form of additional training, improved benefits, cash or monetary compensation, promotion, or a promise of job protection.
Kentucky Non-Compete Agreement Sample
This example of a Kentucky non-compete agreement will let you draft up-to-date agreements for your business clearly, simply, and inexpensively.
Non-Compete Agreement
