Limitations of a Non-compete Agreement

Ideally, an employer/employee relationship allows both parties to benefit, grow, and profit. But what happens if the relationship ends after both have contributed time, effort, and resources to each other?

For employers, non-compete agreements are an important contractual tool to limit their former employees from using the skills and experience that they gained while employed to directly harm their business. For employees, they may become an unfair limitation on their right to make a living. What restrictions on covenants not to compete create the threshold of fairness between the two viewpoints?

Under Iowa Law, a non-compete agreement must meet a standard of reasonableness that balances both the employer and employees’ interests. In essence, Iowa courts place an expectation on employers to draft non-compete provisions that are narrowly tailored with the sole purpose of protecting them from harm. Some factors to consider when determining whether the scope is appropriate are the employees’ role in the organization, relationship with clients, type of skills, and level of access to confidential trade secrets. It is also important determine if the duration and geographic scope of the restrictions are necessary and reasonable.

When drafting a non-compete agreement, it is important that the employer consider three key questions:

  1. Is the restriction reasonably necessary to protect the best interest of the employer’s business?
  2. Is the restriction unreasonably restrictive on the former employee?
  3. Are their any public interests that should bar this type of restriction?

The attorneys at Simpson, Jensen, Abels, Fisher & Bouslog, P.C. are experienced in handling employment law issues. Contact us at (515) 288-5000 to discuss your companies non-compete agreement.

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