When employees move on to other pursuits, they take their knowledge of the former employer with them. If you are a business owner, a well-drafted non-compete agreement can ensure that former employees do not directly compete with your business. Because many employees leave to work for competing firms (or start their own), a non-compete agreement is essential to protect, at least for a time, what you have worked so hard to build. But Mississippi businesses face challenges drafting non-compete agreements; draft one too narrowly and it may not effectively protect their interests; draft it too broadly and it will be deemed unreasonable, unenforceable and not be worth the paper it’s written on. Crafting such an agreement often involves a delicate balancing act that a business must constantly keep in mind.
Mississippi Courts Look Skeptically at Non-Competes
The Mississippi Supreme Court “has stated that restrictive covenants are in restraint of trade and individual freedom and are not favorites of the law…” Cain v. Cain, 967 So.2d 654 (Miss.Ct.App. 2007). Given the fact that such agreements are “not favorites,” they must be “strictly interpreted” and the company seeking to enforce a non-compete “bears the burden to prove that the restriction is reasonable in light of the economic interest sought to be protected.” Id.
Determining What is “Reasonable”
One of the biggest challenges for both employers and employees as to non-competes is the fact that it is notoriously difficult to determine whether any given agreement will be ultimately deemed enforceable. There is no statute that governs non-competes; rather, Mississippi courts have set forth broad principles to be applied when evaluating the validity of such agreements. These principles all revolve around the inherently amorphous concept of “reasonableness.”
“The validity and therefore, the enforceability of a non-competition provision is largely predicated upon the reasonableness and specificity of its terms, primarily, the duration of the restriction and its geographic scope.” Empiregas, Inc. of Kosciusko v. Bain, 599 So.2d 971, 975 (Miss.1992).
How far and how long the contract prohibits competition is thus the key to determining reasonableness. Non-competition agreements are valid only “within such territory and during such time as may be reasonably necessary for the protection of the employer or principal, without imposing undue hardship on the employee or agent.” Id.
To determine what is “reasonably necessary” a court will look to the respective rights of the employer, the employee, and the public. How such an analysis shakes out is not something that can be determined in the abstract. The nature of the business, the nature of the employee’s responsibilities and other factors will play a role. A two-year time limit or a state-wide restriction may be held enforceable in one case, while a six-month or 20-mile limitation may be deemed enforceable in another.
If you are considering a non-competition agreement for employees or key members of your team, or if you are facing a challenge to the enforceability of an existing agreement, you should consult with an experienced Mississippi business lawyer who can work with you to ensure that your valuable corporate assets are thoroughly and effectively protected.
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This website has been prepared by Rushing & Guice, P.L.L.C. for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.