Employee Non-Compete Agreement and Enforceability Memo — Kentucky

KENTUCKY Employee Non-Compete Agreement and Enforceability Memo

Quick-Reference Summary

Part A — Enforceability Memo

TO: [CLIENT / HIRING MANAGER]
FROM: [COUNSEL NAME], [LAW FIRM]
RE: Enforceability of Proposed Non-Compete Agreement with [EMPLOYEE NAME] — Kentucky Law
DATE: [__/__/____]

1. Executive Summary

Kentucky enforces post-employment non-competition agreements under common law principles. There is no general non-compete statute. The single most important post-Creech (2014) issue is consideration: if the proposed employee already works for the company, continued at-will employment will not, by itself, support a new non-compete. The agreement must be tied to a material change — a new role, raise, signing bonus, promotion, equity grant, specialized training, or other tangible benefit beyond what the employee was already entitled to receive.

Provided the consideration requirement is satisfied and the restraint is reasonable in duration, geography, and scope, Kentucky courts will generally enforce the agreement and, where necessary, blue-pencil overbroad provisions rather than strike the agreement entirely.

2. Threshold Analysis — Consideration After Creech

3. Reasonableness Factors (Kentucky Common Law)

Kentucky courts weigh:

• Nature of the employer's business and the legitimate business interest sought to be protected
• Burden on the employee — ability to earn a living in their profession
• Public interest — particularly for healthcare and professional services
• Duration of the restraint
• Geographic scope in relation to where the employer operates and the employee worked
• Scope of restricted activities — must be tied to activities the employee actually performed

4. Recommended Drafting Parameters (KY)

5. Risks and Litigation Considerations

• Consideration challenge is the leading attack post-Creech. The agreement should contain explicit recitals identifying the new consideration (raise, bonus, promotion, training).
• Overbreadth — Kentucky courts blue-pencil but will not rewrite. Draft conservatively.
• Choice of law — Kentucky courts apply Kentucky public policy to Kentucky-resident employees even if agreement specifies another state's law.
• Tortious interference claims against the new employer are available where appropriate.
• Trade secret claim under KRS 365.880 et seq. is an independent backstop and survives even if non-compete is struck.

6. Recommendation

[Subject to the consideration analysis above, the proposed non-compete with [EMPLOYEE NAME] is / is not likely to be enforced as drafted. Recommended modifications: ________________________________.]

Part B — Non-Compete Agreement

EMPLOYEE NON-COMPETITION, NON-SOLICITATION, AND CONFIDENTIALITY AGREEMENT

This Employee Non-Competition, Non-Solicitation, and Confidentiality Agreement (this "Agreement") is entered into as of [__/__/____] (the "Effective Date") between [EMPLOYER NAME], a [State] [entity type] with its principal place of business at [________________________________] ("Company"), and [EMPLOYEE NAME], an individual residing at [________________________________] ("Employee").

Recitals

A. Company is engaged in the business of [________________________________] (the "Business").

B. Employee [is being offered initial employment / is being promoted to the position of / is receiving the following consideration in connection with this Agreement]: [________________________________].

C. In connection with Employee's [employment / promotion / new role], Employee will have access to Company's trade secrets, confidential business information, customer relationships, and specialized training, the protection of which constitutes a legitimate business interest of Company.

D. The parties acknowledge that this Agreement is supported by the following consideration, which the parties stipulate is good, valuable, and sufficient under Kentucky law (including Charles T. Creech, Inc. v. Brown, 433 S.W.3d 345 (Ky. 2014)):

☐ Initial offer of employment with Company
☐ Promotion to position of [________________________________]
☐ Base salary increase from $[________] to $[________]
☐ Signing bonus in the amount of $[________], payable [________________________________]
☐ Equity grant of [________________________________]
☐ Specialized training program: [________________________________]
☐ Access to trade secrets / confidential information not previously available to Employee
☐ Other: [________________________________]

1. Definitions

1.1 "Competing Business" means any business that [________________________________].

1.2 "Restricted Territory" means [the following counties / a [____]-mile radius from each Company office at which Employee worked during the 12 months prior to termination]: [________________________________].

1.3 "Restricted Period" means [twelve (12)] months following the termination of Employee's employment for any reason.

1.4 "Customer" means any person or entity to whom Company sold products or provided services during the 24 months prior to Employee's termination and with whom Employee had material business contact or about whom Employee received Confidential Information.

1.5 "Confidential Information" means non-public information of Company, including but not limited to customer lists, pricing, business plans, financial information, vendor relationships, methodologies, software, and trade secrets as defined in KRS 365.880.

2. Non-Competition

During Employee's employment and during the Restricted Period, Employee shall not, directly or indirectly, within the Restricted Territory, engage in, own, manage, operate, control, be employed by, consult for, or render services to any Competing Business in a capacity substantially similar to the capacity in which Employee served Company.

3. Customer Non-Solicitation

During the Restricted Period, Employee shall not, directly or indirectly, solicit, divert, or accept business from any Customer with respect to products or services that compete with the Business.

4. Employee Non-Solicitation (No-Raid)

During the Restricted Period, Employee shall not, directly or indirectly, solicit, recruit, or hire any person who was an employee or independent contractor of Company at any time during the 6 months preceding Employee's termination.

5. Confidentiality

Employee shall hold all Confidential Information in strict confidence and shall not use or disclose it except as required to perform Employee's duties for Company. The obligations in this Section 5 are perpetual as to trade secrets and continue for [____] years as to other Confidential Information.

6. Return of Property

Upon termination, Employee shall promptly return all Company property, including documents, devices, and electronic files, and shall delete Company information from personal devices.

7. Reasonableness and Blue-Pencil

The parties acknowledge that the restrictions in this Agreement are reasonable and necessary to protect Company's legitimate business interests. If any provision is held to be unenforceable as drafted, the parties intend, and authorize, the court to reform or "blue-pencil" the provision to the maximum extent enforceable under Kentucky law (consistent with Kegel v. Tillotson, 297 S.W.3d 908 (Ky. App. 2009); Hodges v. Todd, 698 S.W.2d 317 (Ky. App. 1985)).

8. Remedies

Employee acknowledges that breach of this Agreement will cause irreparable harm and that Company shall be entitled to seek temporary, preliminary, and permanent injunctive relief, in addition to damages and any other remedies available at law or equity. The prevailing party in any enforcement action shall be entitled to recover reasonable attorneys' fees and costs.

9. Governing Law; Venue

This Agreement is governed by the laws of the Commonwealth of Kentucky, without regard to conflicts of law principles. The parties consent to exclusive venue in the state and federal courts located in [________________________________] County, Kentucky.

10. Severability; Survival

If any provision is held invalid or unenforceable and cannot be blue-penciled, the remaining provisions shall remain in full force. Sections 2 through 8 survive termination.

11. Entire Agreement; Amendment

This Agreement constitutes the entire agreement on its subject matter and supersedes all prior agreements. No amendment is effective unless in writing and signed by both parties.

12. Acknowledgments

Employee acknowledges: (a) Employee has had a reasonable opportunity to review this Agreement and to consult with independent counsel; (b) Employee understands the restrictions; (c) the consideration described in Recital D is good, valuable, and sufficient; and (d) Employee enters into this Agreement freely and voluntarily.

EMPLOYEE:

COMPANY:

Part C — Pre-Signing Checklist

☐ Consideration documented. Recital D identifies a specific, material consideration beyond continued at-will employment (per Creech v. Brown).
☐ Signing bonus paid contemporaneously, if used (separate paystub or wire reference).
☐ Promotion / raise effective date aligned with NCA execution date.
☐ Restricted Territory limited to counties/radius where employee actually worked or Company actively operates.
☐ Restricted Period set at 12 months (or, if longer, supported by factual justification).
☐ Scope of activities tied to Employee's actual role, not "any capacity."
☐ Customer non-solicit limited to customers Employee actually serviced or learned about.
☐ Legitimate business interest articulated in Recital C (trade secrets, customer goodwill, specialized training, confidential info).
☐ Blue-pencil clause (Section 7) included.
☐ Governing law / venue clauses set to Kentucky.
☐ Trade secret / confidentiality terms anchored to KRS 365.880.
☐ Acknowledgment of opportunity to consult counsel (Section 12) preserved.
☐ Reasonable opportunity to review — provide draft at least [____] business days before execution.
☐ Existing employer NCA conflict check completed for employee being hired from a competitor.
☐ Onboarding file retains signed original, offer letter, and consideration documentation.

Sources and References

• Kentucky Revised Statutes (KRS): https://apps.legislature.ky.gov/law/statutes/
• KRS 365.880 (Kentucky Uniform Trade Secrets Act): https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=51487
• Charles T. Creech, Inc. v. Brown, 433 S.W.3d 345 (Ky. 2014): https://law.justia.com/cases/kentucky/supreme-court/2014/2012-sc-000651-dg.html
• Kegel v. Tillotson, 297 S.W.3d 908 (Ky. App. 2009)
• Hodges v. Todd, 698 S.W.2d 317 (Ky. App. 1985)
• Central Adjustment Bureau, Inc. v. Ingram Assocs., 622 S.W.2d 681 (Ky. App. 1981)
• Kentucky Bar Association: https://www.kybar.org/