Restrictive Covenant Drafting: Ten Tips to Avoid the Traps

Non-Compete, Non-Solicit, Restrictive Covenants

Tip 1: Choose your choice of law wisely and FIRST.

  • The law you choose to apply to a restrictive covenant is regularly outcome determinative in enforcement proceedings (e.g. Illinois’ rule on at-will employment as consideration, North Carolina’s rule on blue-penciling, Louisiana’s law on geographic scope, Florida’s statute on presumptive validity, etc.) 
  • And there are sometimes three or four states from which to pick:
    • where the employer or seller is located (state of incorporation or principal place of business)
    • where the employee or purchaser is located
    • where the place of performance is located.  
  • So take the opportunity to pick the law that is most likely to do what your client already presumes will be done: your restrictive covenants will be enforced.
  • Relatively speaking, Delaware –often the default state of incorporation– is a solid and defensible choice.

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Court Finds Two-State Non-Compete in Sale of Business Contract Void for Overbreadth

blue-pencil_cropSometimes a party to a contract gets greedy. As an example, sometimes a party seeks an onerous non-competition provision in a contract. Will a court enforce it? Will the court modify the agreement if it is too broad in some respect? Let’s see how this played out in a real case.  Continue reading

Supreme Court of Wisconsin Finds Non-Solicitation of Employees Provision an Unenforceable Restraint on Trade

Supreme Court of Wisconsin, No-Solicit, Manitowoc Company, Lanning

In The Manitowoc Company, Inc. v. Lanning, the Supreme Court of Wisconsin ruled that a non-solicitation of employees provision contained within an employment agreement was unreasonable and unenforceable under Wisconsin statute as overly broad.  Continue reading

Illinois Court Examines What Constitutes Improper “Solicitation” Of Customers

Non-solicit, Employment Agreement, Quality Transportation Services, Thompson Trucking, Illinois

Although many restrictive covenants prohibit solicitation, there is comparatively little case law discussing in detail what “solicitation” means. A new Illinois Appellate Court decision sheds some light on the meaning of this key term. 

Quality Transportation Services, Inc. v. Thompson Trucking, Inc., 2017 IL App (3d) 160761 involved a contract dispute arising from the language of a transportation brokerage agreement. Continue reading