USA Law and Practice Contributed by: Chuck Baldwin, Ken Siepman, Bonnie Martin and Justin Allen, Ogletree Deakins
utes (eg, Title VII of the Civil Rights Act) do not provide for individual liability. Under the American doctrine of respondeat superior, an employer may be held: • vicariously liable for an employee’s acts that are committed within the scope of employment; or • liable for negligence in the hiring, supervision or retention of an employee, as determined by state law.
scope. Protectable business interests typically include trade secrets and other confidential information, cus - tomer relationships and company goodwill. Converse - ly, companies may not use non-compete agreements to stifle fair competition or restrict employee mobility; these would not be considered protectable interests. In determining whether a non-compete is reasona - ble, courts typically examine the covenant’s temporal scope, geographic scope and substantive scope. If a non-compete is determined to be unreasonable, some states give courts broad discretion to reform or “blue pencil” the agreement, whereas courts in other states do not. The permissible length of a non-compete agreement varies greatly from state to state. In states where restrictive covenants are governed by the common law, one to two years is generally within the time peri - od that courts will consider reasonable. Meanwhile, some state statutes limit non-compete agreements to 12, 18 or 24 months. The permissible scope of a non-compete covenant is typically determined on a case-by-case basis and will vary depending on the employer’s industry and the employee’s duties. In general, a non-compete should be tailored to the employee’s footprint and duties for the employer. By way of example, if the employer’s business is a storefront or a physician’s office that serves custom - ers or patients from a defined geographic area, the geographic scope may be limited to some number of miles or counties surrounding the business. Simi - larly, if a sales representative’s duties are limited to selling products and services in a particular territo - ry, the geographic scope of the non-compete likely could not extend into locations beyond that territo - ry. On the other hand, if an employer’s business is national in scope and the employee’s duties impact the employer’s operations throughout the entire com - pany, a nationwide non-compete may be permissible in some states. A non-compete should generally be limited to the are - as of the employer’s business the employee worked in or acquired confidential information about. Typically,
2. Restrictive Covenants 2.1 Non-Competes
Although non-competition agreements have been the subject of recent federal regulatory and congressional attention, non-compete law is presently regulated at the state level. In some states, non-compete agree - ments are governed entirely by common law doc - trines, whereas other states have statutory schemes regulating (or entirely prohibiting) non-compete agree - ments. A growing number of states have enacted legislation in recent years to limit the use of non-compete agree - ments or impose additional obligations on employers seeking to enforce them. Among other things, state non-compete statutes may: • ban non-competes entirely; • prohibit the use of non-competes for low-wage earners; • require specific notice to employees; • set temporal limits on non-compete covenants; and/or • impose heightened consideration requirements. Meanwhile, some states have adopted statutes gov - erning the use of non-competes for specific industries or professions, such as physicians. For details of the special rules that apply to non-competes governing physicians in the State of Texas, please refer to the USA – Texas Trends & Developments chapter in this guide. In general, to be enforceable, a non-compete covenant must be tailored to protect a company’s legitimate, protectable business interests and be reasonable in
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