Chapter § 9-3 Checklist

• Jurisdiction: United States

9-3 Checklist

A. Reason/Purpose of the Noncompete

1. Are the two companies truly in competition with one another? Why or why not? Does the agreement define competing business? If not in competition, then no further analysis needs to be undertaken.

2. Does the employer have a protectable interest?

3. Is the noncompete part of the sale of a business? If so, its reasonableness will be analyzed under a different standard review Henson Patriot Ltd. Co., LLC v. Medina, No. SA-14-CV-534-XR, 2014 U.S. Dist. LEXIS 127795 (W.D. Tex. Sept. 11, 2014) (in context of scale of business, a noncompete can be extended to third-party nonsignatories).

4. If goodwill is a protectable interest, ask:

a. Did employer provide a financial incentive for employee to create goodwill? What did the employer do?
b. Did employee understand that goodwill belongs to the employer and not to the employee? Explain.
c. What about clients and customers that the employee brought with him or her to the company? Who owns that goodwill? Was it addressed at the outset of employment?
d. Was employee reimbursed for entertainment expenses for social events intended to develop goodwill? Is there a policy on entertainment expenses? Does the policy discuss the creation of goodwill via entertainment?

5. If confidential information/trade secret is a protectable interest, ask

a. What is the information?
b. Why is it considered confidential?
c. What steps were taken to ensure its confidentiality?
d. Why would possession by a competitor place company at an unfair competitive advantage?
e. Are customers readily identifiable by those outside the company?
f. Can the purported confidential information be determined by a simple inquiry with the client/customer?
g. Were the company's pricing policies and bidding strategies uniquely developed or could these items be developed by the customers themselves?
h. Does the information have a "shelf life?" The reasonableness

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