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As the authoritative force in Employment Law, we are committed to ensuring that we live up to our word by keeping you in the loop, informed, and enlightened about various legal and non-legal issues related to labor law. Through our ongoing series, we have provided you with crucial information on how to enforce restrictive covenants and protect trade secrets. To ensure that we keep you in the loop, this blog is Part VI of our abridged series titled “Fundamental Aspects of Restrictive Covenants.” In Part V, we provided you with a hands-on guide on “Understanding Reasonable Geographic Restrictions for Covenants” and promised to hammer on “Understanding Reasonable Time Restrictions for Covenants” in the upcoming blog. Because we are a firm of our word, we have discussed how to understand reasonable time limitations for restrictive covenants in this blog.

How to Understand Reasonable Time Limitations for Restrictive Covenants

Similar to geographic restrictions discussed in Part IV of the series, the law also requires non-competition agreements to be reasonable in time limitations for them to be enforceable by employers. While most of these restrictions are governed by state common laws, there are, in some states, specific statutory presumptions concerning what time restrictions meet the reasonability standard. Thus, a set of particular facts must form the basis for the analysis of a restrictive covenant’s time limitation. This implies that there are significant variations concerning a given set of circumstances and by state when it comes to what entails reasonable time restrictions for a restrictive covenant.

Time Limitations for Restrictive Covenants

Generally, the limitations set by applicable state law and the interest sought by an employer determine the reasonableness of a time restriction in a restrictive covenant. When it comes to time limitations, the law provides for statutory and non-statutory time restrictions for restrictive covenants.

Statutory Time Restrictions

Most states have statutes under which the time range required for a particular restrictive covenant to be enforceable is specified. For instance, in Georgia, although the presumption is rebuttable, restrictive covenants whose duration is not more than two years are presumptively reasonable. Further, while Louisiana allows a set time restraint of five years or less for restrictive covenants that protect trade secrets, non-compete restrictive covenants in Florida are required not to exceed two years. Nonetheless, the issue concerning the reasonableness requirements related to time limitations for such covenants is a matter of debate in most states. Technically, as long as the information remains confidential or a trade secret, such provisions are permitted to remain effective in most states.

Non-statutory Time Restrictions

In some instances, courts have to rule on cases without state statutes specifying the time limit required for a given restrictive covenant to be reasonable. In such a scenario, courts consider the expected duration the confidential information or trade secret is set and required to be protected when they evaluate the time restriction. For instance, if a trade secret has been set to remain worthy of protection for at least five years, then a court would consider a three-year restriction to be reasonable. Per se, restrictions that range between one to two years will be generally upheld by courts.

However, in a scenario where the interest of an employer diminishes at a rapid rate, only shorter time limitations may be enforced by courts. This means that a court may find a restriction set to last for six months reasonable where the interest at issue is expected to become unworthy of protection after the six months. In other cases, courts consider the amount of time required to restore or develop a comparable relationship level with a client where client goodwill is the interest of protection. Similarly, courts would factor in the time required to recoup an investment made and how long it would take for a replacement to be trained when the issue in question is specialized training.

It goes without saying that a time limitation without an end would often be found to be unreasonable by courts. This implies that as a best practice, every employer should make sure that all time references are fixed and consistent when designing a reasonable time restriction for a particular restrictive covenant. Based on a past survey, employee non-solicits, client non-solicits, and non-competes were found to generally have one-year restrictions. However, this time limit varies by state and is subject to state statutes under which the time range required for a particular restrictive covenant to be enforceable is specified.

In the next blog, which will be Part VII, we will conclude this abridged series on “Fundamental Aspects of Restrictive Covenants” by hammering on and providing you with an overview of “How to Set Enforceable Restraints on a Person’s Activity.”

Until then, stay tuned for more educative, enlightening, informative, and interesting content. In the interim, reach out to us with questions or comments on our website at the Contact Us page!

Always rising above the bar,

Isaac T.,

Legal Writer & Author.