Government contractors compete in a market that depends on proprietary approaches that frequently involve unique experience, expertise, or key employees. Because the stakes are so high and the competition fierce, government contractors often make significant investments to attract, train, and retain talented employees, and develop unique technical and management processes to gain a competitive advantage. The loss of an employee to a competitor has the potential to harm a contractor’s new business prospects and dilute its competitive advantages. For those reasons, non-compete clauses can be an attractive option for a government contractor to protect its business.
Every jurisdiction applies its own test to determine whether a non-compete agreement is enforceable; some will not honor restrictive covenants at all. For the jurisdictions that do, courts generally consider, among other factors, whether the scope of the agreement (i) is narrowly tailored to the employer’s legitimate business interest, (ii) is unduly burdensome on the employee’s ability to earn a living, or (iii) violates public policy. Non-compete clauses are generally difficult to enforce, but government contracting is the rare business where specific personnel and the knowledge they possess are the competitive advantage, often making the difference between winning or losing a contract. Even then, however, the strong interest the government has in securing the best personnel for the job may lead to a restrictive covenant being void as against public policy.
This article discusses several strategies to consider when drafting non-compete clauses for use in government contracting contexts. It encourages specificity through narrowly-tailored terms. It also includes a Case Study that shows how the circumstances of a unique situation might be able to save a government contractor from an otherwise broad and unenforceable non-compete clause.
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