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Will a noncompete construction clause hold up in court?

On Behalf of | Feb 1, 2019 | Construction Law

Almost every industry uses some version of a noncompete contract to protect its customer databases and proprietary information from being siphoned off by competitors. The problem arises when those contracts are deemed to be too broad or otherwise unenforceable by the courts.

In the construction industry where workers are hired and dismissed routinely from projects, no court is going to rule that a noncompete contract is valid for day-laborers or carpenters. However, positions like project managers and other white collar jobs bring employees into contact with vulnerable information and profitability figures that could sink a company if it falls into the wrong pair of hands.

You could argue that your business success hinges on such proprietary information remaining solely within the company, and therefore, you need to protect its integrity with a noncompete clause. If that information is typically unavailable to the public and highly desirable by your business competitors, it is likely you will prevail in a court challenge.

But noncompete clauses can still sometimes be found to be far too overarching to be legally enforceable.

Meeting the initial threshold of a noncompete provision may be the most challenging. But once that is done, business owners must still show that the restrictions are not too broad or geographically limiting.

Then, construction company owners must consider the term length of any noncompete clause. It’s likely a court would toss out a five-year term as being unnecessarily long. But two years is much more in the realm of possibly being enforceable.

A final consideration of any noncompete agreement is that the benefits are not solely one-sided for the employer. To agree not to compete, the employee must also garner some tangible benefits and be uniformly applied to all holding certain positions.

Don’t be afraid to get too granular with your noncompete contracts, as in the construction industry, they should be fact-specific.

To avoid potential problems arising from improperly worded noncompetes, have your legal counsel review each contract that you are attempting to enforce before they are signed by your workers.