Customizing Multi-State Non-Compete Agreements

Posted on Jul 10, 2012

(This is the final of four posts discussing current issues with non-competition agreements that cross state lines. — Keith Sieczkowski)

There is no “standard” non-compete agreement that can be used all the time regardless of the states involved.

As we recently observed with the Marsh decision in Texas, non-competes are regularly the subject of judicial interpretation since so much is dependent on “public policy”.

I have found at least one case that indicates that the parties’ Choice of Law provision with respect to a non-competition agreement in the purchase of a business may be enforceable even if the separate employment non-compete would be interpreted under local state law. In the case I’m mentioning, the parties chose Delaware as the law to be applied and the case was in Louisiana. The court used Delaware law with respect to the non-compete in the purchase agreement, but used Louisiana law to determine the enforceability of the employment non-compete.

Finally, there should always be a “blue pencil” or reformation provision in these agreements to allow for the potential myriad of enforcement interpretations. Without an appropriate provision, some courts have gone so far as to say that the entire non-compete is thrown out if specific statutory and/or judicial requirements are not met.