Geographic restrictions in non-compete agreements continue to undergo a judicial re-analysis in light of the high-tech, nationwide economy. Most older cases across jurisdictions require an employer to craft a non-compete agreement with a reasonable geographic scope.
However, a recent Virginia case demonstrates the problem when an employer conducts business nationwide. Senture, LLC entered into an employment agreements with Joe Dietrich and Tom Swider. Each contained a Kentucky choice-of-law provision, which the court found was reasonable given Senture's business ties to Kentucky. The agreements also contained nationwide non-compete covenants, which the employees challenged on a Rule 12(b)(6) motion to dismiss.
The court refused to dismiss the claims for breach of contract, expressly noting that nationwide non-competes can be valid if the employer demonstrates that it conducts business throughout the United States. Because of the procedural posture of the case, Senture will still have to demonstrate a nexus between its business and the contractual restrictions.
Employers can always limit a challenge to the scope of a non-compete agreement by instead including an activity restraint requiring an ex-employee to stay away from customers he or she worked with during the course of employment. Such clauses normally mitigate a defendant's arguments as to overbreadth. In Illinois, however, customer non-solicitation covenants also must make sure they do not include all of the employer's accounts as restricted - only those the employee had some responsibility for servicing or supervising.
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Court: United States District Court for the Eastern District of Virginia
Opinion Date: 9/8/08
Cite: Senture, LLC v. Dietrich, 2008 U.S. Dist. LEXIS 100288 (E.D. Va. Sept. 8, 2008)
Favors: Employer
Law: Kentucky
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