In the professional landscape of our state, noncompete agreements serve as a critical tool for employers seeking to safeguard trade secrets, customer relationships and goodwill. However, the enforceability of these agreements is not a straightforward matter in the eyes of Alaska courts.
While the courts generally disfavor such agreements due to potential trade restraints and hardship on former employees, they are willing to enforce them if deemed reasonable and necessary to protect legitimate business interests.
Elements of reasonable noncompete agreements
Determining the reasonableness of a noncompete agreement hinges on a case-by-case evaluation. First, Alaska courts look at the agreement’s duration and geographic scope. Specifically, the restrictions’ timeframe and geographic limitations play a pivotal role. Courts assess whether these constraints are reasonable and necessary to protect the employer’s interests.
Next, courts look to the nature of the employee’s role. This includes whether the employee was the sole contact with specific customers or had access to confidential information. Both influence the reasonableness of the agreement.
Courts scrutinize whether the agreement seeks to eliminate unfair competition or goes beyond the bounds of ordinary competition. The court evaluates whether the benefits to the employer outweigh the detriments to the employee, considering factors such as the employee’s sole means of support.
The courts also look at whether the employee’s talent and if it was cultivated during their employment. Finally, the court considers whether the forbidden employment is incidental to the main employment.
Consequences of unenforceability
When a court deems a noncompete agreement unenforceable, it can take one of two actions. The court may invalidate the entire agreement, freeing the employee from any restrictions. Alternatively, the court may modify or “blue pencil” the agreement to make it reasonable and enforceable. This option is typically chosen if the court perceives the Alaskan employer’s actions as good faith mistakes in drafting.
Guidance for employers
For employers aiming to deploy noncompete agreements, consulting the law first is crucial. Drafting reasonable, enforceable agreements that align with Alaska law is the only way to ensure that they will be enforced. Regular reviews of existing agreements are also recommended to ensure validity and currency.