Non-Compete Agreements in Idaho

A non-compete agreement, also known as a covenant not to compete, is an agreement between an employee and an employer whereby the employee agrees not to engage in activity that competes with the employer’s business within a certain geographic area for a certain time period. Most states enforce non-compete agreements; however, there are a few jurisdictions that specifically prohibit them.

In jurisdictions where non-compete agreements are recognized, some courts will refuse to enforce agreements they deem are unreasonable. For instance, agreements that contain time limitations that are too long or geographic regions that are too large. Courts will look at a variety of factors to determine if these restrictions are reasonable.

Idaho recognizes non-compete agreements and has adopted is own statute governing non-compete agreements. Title 44, Chapter 27, of the Idaho Code requires non-compete agreements to: (1) cover only what the statute terms “key employees,” and “key independent contractors;” (2) protect only “legitimate business interests;” and (3) contain only restrictions that are reasonable as to “duration, geographical area, type of employment or line of business,” and do not impose greater restraints than are “reasonably necessary to protect the employer’s legitimate business interests.”

What are “key” employees and contractors?

As to “key employees” and “key independent contractors,” the statute defines these as:

[T]hose employees or independent contractors who, by reason of the employer’s investment of time, money, trust, exposure to the public, or exposure to technologies, intellectual property, business plans, business processes and methods of operation, customers, vendors or other business relationships during the course of employment, have gained a high level of inside knowledge, influence, credibility, notoriety, fame, reputation or public persona as a representative or spokesperson of the employer and, as a result, have the ability to harm or threaten an employer’s legitimate business interests.

I.C. 44-2702(1). The Idaho Code also creates a rebuttable presumption that an employee or independent contractor is a “key” employee or contractor if that person “is among the highest paid five percent (5%) of the employer’s employees or independent contractors.” In order to rebut this presumption, “an employee or independent contractor must show that it has no ability to adversely affect the employer’s legitimate business interests.” I.C. 44-2704(5).

Only Legitimate Business Interests are Protected

Regarding “legitimate business interests,” they include, but are not limited to:

[A]n employer’s goodwill, technologies, intellectual property, business plans, business processes and methods of operation, customers, customer lists, customer contacts and referral sources, vendors and vendor contacts, financial and marketing information, and trade secrets as that term is defined by chapter 8, title 48, Idaho Code.

I.C. 44-2702(2). Interests outside of these are not covered by the statute and may not be enforced.

Non-Compete Restrictions Must be Reasonable

The Idaho Code includes several guidelines to determine whether the restrictions in a non-compete are reasonable.

The first involves the time limit on the non-compete provision (meaning how long the employee is prevented from competing after ending his/her employment). If the agreement lasts for a term of eighteen (18) months or less, then there is a rebuttable presumption that it is reasonable. I.C. 44-2704(2). The Code also requires that any restriction that extends beyond eighteen (18) months, include additional consideration (other than employment or continued employment). I.C. 44-2704(1). So, an employer must ensure that the employee is being compensated in exchange for entering into any agreement that extends longer than eighteen months.

The second involves reasonableness as to geographic region. The Idaho Code creates a  “rebuttable presumption that an agreement or covenant is reasonable as to geographic area if it is restricted to the geographic areas in which the key employee or key independent contractor provided services or had a significant presence or influence.” I.C.44-2704(3.

Finally, the Idaho Code includes “a rebuttable presumption that an agreement or covenant is reasonable as to type of employment or line of business if it is limited to the type of employment or line of business conducted by the key employee or key independent contractor . . . Idaho Code, while working for the employer.” I.C. 44-2704(4).

Conclusion

The law encompassing non-compete agreements in Idaho is complicated and there are numerous details that only an experienced attorney can accurately analyze. If you need assistance with preparing an agreement or need analysis regarding the terms of an agreement, please contact the experienced attorneys at Brian Webb Legal for a consultation.