When have Non-Competes been upheld?

Non-Competes have become increasingly unenforceable, as we’ve covered in Are Non-Competition Clauses Enforceable? and last week’s When have Non-Competes been struck down? As promised, we’re back this week with the opposite end of the spectrum, when non-competes have been upheld. Next week, we will conclude this mini-series with the consequences of breaching non-competes.

Non-Competes are Upheld when Scope is Reasonable

While there have been multiple ways non-competes have been struck down, the reason to uphold them have overwhelmingly been around a reasonable scope. Let’s revisit what scope typically gets evaluated:

1. Function: The non-compete must be protecting legitimate business interests (e.g. an apple company protecting their ability to sell apples to their customers, not fruits in general).

2. Duration: Depending on the state, between 1 to 2 years is considered reasonable.

3. Geography: Typically a radius of 50 to 100 miles of a specific business operations area.

All three aspects of scope are judged against the context of protecting an individuals right to make a living. Let’s take a look at some examples below.

Update Inc. v. Samilow (2018) - Virginia District Court

The court upheld a non-compete lasting 1 year and within a 50-mile radius of any office, branch office, or production facility of the employer. The court felt such restrictions were reasonable in “function, geographic scope, and duration” as the individual’s new business was providing similar services and operated nationally just like his previous employer. While national-level non-competes do not typically pass the sniff test, this one did due to the national nature of the individual’s new business.

Blaskiewicz v. Spine Institute of Idaho (2022) - Supreme Court of Idaho

This case involved a neurosurgeon with a non-compete that lasted for 18 months and covered a 50-mile radius of his previous employer. He had to either get permission or pay $350,000 to practice under that scope. Even though he won his initial case with the trial court, the Supreme Court cancelled that judgment because it didn’t fully consider the non-compete against Idaho Statute 44-2701, which allows Non-Competes with reasonable scope (including specifically allowing for a duration up to 18 months).

Saunier v. Stark Truss Co. (2016) - Ohio Court of Appeals

This case upheld a non-compete lasting for 1 year covering 100 miles of the company. In this case, the individual had sued to retain his severance because he felt his previous employer didn’t have the “sole discretion” of deciding who was and wasn’t a competitor. The court ruled in the company’s favor given the new employer was also a lumber company, and the individual didn’t get his severance pay.

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In closing, we’ll cover one of the rare times non-competes made it to the US Supreme Court in Nitro-Lift Technologies, L.L.C. v. Howard (2012) to illustrate why non-competes often don’t make it to courts at all. In this case, the individual was required to resolve all contract dispute through confidential arbitration, but they took their non-compete clause to the Oklahoma Supreme Court, who struck it down. Unfortunately, this decision was cancelled by the US Supreme Court as all disputes had to go through arbitration. That case was over a decade ago, and the Federal Trade Commission has become increasingly aggressive about stomping out non-competes regardless of arbitration requirements, so we hope the tide is changing!

For advocacy and beyond,
The Ask Ginkgo Team