Traditionally, non-compete agreements have included a geographic scope to protect an employer’s customer contacts and goodwill. The general rule is that non-compete agreements are enforceable to the extent they can be narrowly tailored geographically and temporally, though such restrictions are not enforceable to protect an employer from mere competition by a former employee.
For example, one Missouri case supported the reasonableness of a two-year non-compete agreement for an operations manager that was limited to 50 miles from where services were rendered by the employee. In another legal decision, a 100-mile radius against a customer service representative focused on that employee’s former office location in St. Louis.
But what is a reasonable geographic scope when the majority of an employee’s sales and/or marketing activities are Internet-based? In today’s electronic economy, customers are located in multiple cities and in multiple states.
In a recent non-compete case arising in Delaware, the employer operated a cellphone-activation business largely over the Internet, and thus not limited geographically. Ultimately, the court noted that while the non-compete restriction applied to the entire United States as well as any country in which the employer conducted its business, it complied with the business interest of the company as an Internet-based business. Coupled with the restriction only on competitive activities (as opposed to employment by a competitor), the geographic scope of the provision was found not to be unduly burdensome.
Likewise, in a Massachusetts case this year, the non-compete agreement had no geographic boundary. The court itself imposed one finding that an Internet company, which is without geographic boundaries, can only truly be protected by a broad prohibition on a former employee’s work for a competitor. Therefore, the court found that a non-compete restriction including the entire United States would be reasonable under the circumstances.
President Thomas Jefferson once said, “I am not an advocate for frequent changes in laws and Constitutions. But laws and institutions must go hand in hand with the progress of the human mind.”