Avoid Drafting an Overbroad Non-Compete Agreement

What action might a court take if my non-compete agreement is ruled overbroad?

Non-compete agreements can prove essential in protecting a business’ trade secrets. While non-compete agreements are an integral part of many employment contracts, courts tend to scrutinize these agreements closely when challenged in court. A recent case arising of the Federal District Court for the Northern District of Illinois serves as a reminder to employers as to why their restrictive covenants should be limited in scope, duration, and substance.

Medix Staffing Solutions, Inc. v. Dumrauf

In the case of Medix Staffing Solutions, Inc. v. Dumrauf, defendant Dumrauf was the Director of Medix Scientific, a company that provides staffing for healthcare and IT companies. Dumrauf signed a non-compete agreement almost a year after being employed with the company, in consideration for his continued employment.

The agreement stated that Dumrauf could not, for 18 months after termination of his employment, be employed or connected in any manner to any business that offered a product or service in competition with Medix or engaged in the same business as Medix, within a 50-mile radius of any Medix office. Dumrauf later left his position and took a job with ProLink, which is a competitor of Medix. Dumrauf only occasionally worked in the Phoenix office, which is within 50 miles of a Medix office, spending the rest of his time in Ohio and Kentucky.

When sued for violation of the agreement, Dumrauf moved for dismissal of the action on the grounds that the covenant was overbroad. Dumrauf urged that a blanket prohibition on working for any competitor within 50 miles of a Medix office unduly restricted his right to employment. He urged that per the covenant, he couldn’t even work as a janitor at another company in a competing business.

The judge ultimately agreed with the defendant and struck down the non-compete agreement. Rather than modifying the agreement, the judge held that modification of the covenant would require rewriting the entire clause, thus mandating that the clause be ruled completely unenforceable. The case should serve as an example to other employers when drafting a non-compete agreement. Just because your geographic scope is defined and limited, and the agreement has a time limit, does not mean the agreement is enforceable. Employers should closely tailor the agreement to protect solely their legitimate business interests.