Whether you’re a business owner new to non-competes or looking to ensure your existing agreements are enforceable, it’s important to understand the nuances of Idaho non-compete law.
Non-competes prevent former employees from leveraging company knowledge, trade secrets, or client relationships to benefit a competitor, thereby safeguarding your company’s interests.
In this article, we’ll answer key questions like: Are non-competes enforceable in Idaho? and How enforceable is a non-compete in the state? We’ll also cover best practices to help you protect your business.
Are Non-Competes Enforceable in Idaho? Validity and the FTC’s proposed Non-Compete Ban
Non-compete agreements are enforceable in Idaho, but only if they meet specific legal requirements.
In July 2024, the Federal Trade Commission’s (FTC) non-compete ban, initially set to take effect on September 4, 2024, was blocked by a federal court. The Northern District of Texas issued a nationwide injunction, halting the rule from going into effect. In granting the injunction, the court ruled that the plaintiffs were likely to succeed on the merits of their case, namely, that the FTC exceeded its congressionally delegated authority to adopt such a rule. The court stated the nationwide ban was supported by flawed empirical evidence, and the FTC failed to account for the opposing arguments that non-competes promote positive benefits.
This decision is not the final word, as conflicting rulings in other states suggest a potential for further legal battles, including a likely appeal to the U.S. Court of Appeals.
For now, the nationwide block prevents the enforcement of the FTC’s ban, leaving non-competes in place unless state laws provide otherwise.
For a non-compete to be valid, it must:
- Not impose a greater restraint on the employee than necessary.
- Protect a legitimate business interest (such as trade secrets or client relationships).
- Be reasonable in geographic scope—the area covered by the non-compete must be tied to the region where the business operates or where the employee had a direct impact.
- Be reasonable in duration—in Idaho, non-competes generally cannot extend beyond 18 months unless exceptional circumstances apply.
Idaho Non-Compete Law: Understanding the Basics
Idaho’s non-compete law centers on balance: protecting employers from unfair competition while ensuring that employees can earn a livelihood. The law defines legitimate business interests that employers can protect through non-competes, including:
- Intellectual property, including trade secrets
- Client lists
- Business plans
- Financial and marketing information
Employers can enforce non-competes to prevent former employees from unfairly using this information against them, but only if the agreement is reasonable and not overly restrictive. Courts in Idaho will not enforce non-competes that seem designed to stifle competition without a legitimate business interest at stake.
How to Draft an Enforceable Non-Compete Agreement in Idaho
Enforcing a non-compete in Idaho starts with drafting the agreement correctly from the outset. Here are some critical factors to consider:
1. Clearly Define the Scope
One of the most important aspects of Idaho non-compete law is reasonableness. The scope of the non-compete must be directly related to protecting your business interests. For example, if your company only operates within a specific region, a non-compete that covers a nationwide area would likely be deemed unenforceable. Similarly, the duration of the restriction must be reasonable—most courts consider 6 to 12 months to be fair, while anything beyond 18 months will face stricter scrutiny.
2. Tailor the Agreement to Specific Employees
Non-competes shouldn’t apply to every employee at your company. Idaho courts tend to enforce non-competes for employees with access to sensitive information—such as executives, managers, and those with specialized knowledge—but may be less inclined to enforce broad non-compete agreements against lower-level employees. Ensuring that the agreement is tailored to specific employees with legitimate access to business secrets will make the agreement more likely to hold up in court.
3. Communicate the Agreement Clearly
To ensure a non-compete is reasonable, it should be clearly communicated to the employee. Present the agreement as part of the initial employment contract or as a condition of continued employment. Avoid overly complicated legal jargon; the employee should understand the terms of the agreement and how it impacts their future employment prospects.
How to Enforce a Non-Compete Agreement in Idaho
Even with a well-drafted agreement, enforcing a non-compete can be complex. Here’s a step-by-step guide to ensuring your non-compete holds up:
1. Document Violations
If a former employee violates the terms of the non-compete, your first step should be to gather evidence. This may include documenting how the employee is competing with your business, leveraging trade secrets, or soliciting clients. The more concrete evidence you have, the stronger your case will be in court.
2. Send a Cease-and-Desist Letter
Often, a simple cease-and-desist letter can resolve the issue. This letter informs the former employee that they are in violation of the non-compete agreement and asks them to cease the competitive activity. It may also be appropriate to send this letter to their new employer if the violation involves working for a competitor.
3. Seek Injunctive Relief
If the cease-and-desist letter doesn’t resolve the issue, you may need to file a lawsuit to enforce the agreement. In Idaho, courts can issue an injunction—a court order that stops the employee from continuing the competitive activity. Injunctive relief can be a powerful tool to enforce a non-compete agreement, but it’s important to act quickly, as courts are more likely to grant relief when the competitive activity is still ongoing.
How Enforceable is a Non-Compete?
The enforceability of a non-compete agreement in Idaho depends on whether the agreement is fair and reasonable. Courts will look at the specific circumstances of each case, including the business interests being protected and the employee’s ability to earn a living. In general, non-competes are more likely to be enforced when they are narrowly tailored to protect legitimate business interests without unnecessarily restricting an employee’s future employment opportunities.
Consult with a Business Attorney
Idaho non-compete law can be tricky, and the enforceability of these agreements often comes down to the details. If you’re a business owner looking to enforce a non-compete agreement or ensure that your contracts are legally sound, consulting with a business attorney is crucial. A knowledgeable attorney can help you draft enforceable agreements and guide you through the process of taking legal action if necessary.