Employee Non-Compete Agreement and Enforceability Memo — New Mexico

NEW MEXICO Employee Non-Compete Agreement and Enforceability Memo

Quick-Reference Summary

Part A — Enforceability Memo

TO: [Hiring Manager / General Counsel]
FROM: [Drafting Attorney]
RE: Enforceability of Proposed Non-Compete — New Mexico Employee
DATE: [__/__/____]

1. Threshold Question — Is the Employee a "Health Care Practitioner"?

NMSA 1978, § 24A-4-1(B) defines "health care practitioner" as:

Section 24A-4-2(A) makes a noncompete provision restricting a covered practitioner's right to provide clinical health care services in New Mexico unenforceable upon termination of the agreement, a renewal or extension, or the practitioner's employment with the party seeking enforcement. Before applying that rule, review the execution-date provisions in § 24A-4-5(B)-(D) and the narrow exclusion in § 24A-4-5(A).

Drafting note: Do not use the Part B noncompete against a covered practitioner for clinical services in New Mexico after a listed termination event. Section 24A-4-3(C), however, expressly preserves patient/employee nonsolicitation lasting one year or less after the last date of employment. Sections 24A-4-3 and 24A-4-4 require clause-specific review; they do not make every repayment, nondisclosure, nonsolicitation, or damages clause automatically enforceable.

2. Non-Healthcare Employees — Reasonableness Analysis

Outside Chapter 24A, Article 4, Nichols v. Anderson, 1939-NMSC-028, ¶¶ 8-11, recognizes a partial employment restraint when it is incidental to a legitimate transaction, supported by sufficient consideration, and confined to limits no broader than the promised protection reasonably requires. Lovelace Clinic v. Murphy, 1966-NMSC-165, ¶¶ 18, 23-29, treats reasonableness and equitable hardship as fact-specific questions. Use the following drafting prompts, not as presumptions or safe harbors:

3. Severability; No Assumed Reformation

The verified authorities do not establish a general right to have a court rewrite an overbroad employment covenant. Insure New Mexico addresses discretionary injunctive relief, not blue-pencil authority. Draft each limit to stand on its own and provide only for severance to the extent applicable law permits.

4. Choice of Law / Forum

For an agreement for clinical health care services to be rendered in New Mexico, § 24A-4-2(B) makes a provision selecting another state's law or requiring litigation in another state void, unenforceable, and against public policy. This template selects New Mexico law and a New Mexico forum. Obtain separate conflicts and forum analysis for agreements outside that subsection.

5. Consideration

6. Recommended Enforcement Strategy

7. Recent Developments

• 2023 amendment: Added psychologists, physician assistants, and pharmacists. For those professions, Chapter 24A, Article 4 applies to agreements, renewals, or extensions executed on or after April 4, 2023. See § 24A-4-5(D).
• 2024 recompilation: Former §§ 24-1I-1 through 24-1I-5 were recompiled as §§ 24A-4-1 through 24A-4-5 effective July 1, 2024.
• Current nonsolicitation text: Section 24A-4-3(C) preserves patient/employee nonsolicitation lasting one year or less; it does not impose the former template's claimed ban.

Part B — Non-Compete Agreement

THIS EMPLOYEE NON-COMPETE AGREEMENT (this "Agreement") is entered into as of [__/__/____] (the "Effective Date"),

by and between:

EMPLOYER:
Name: [________________________________]
Address: [________________________________]
City/County, New Mexico [ZIP]: [________________________________]
(the "Company")

and

EMPLOYEE:
Name: [________________________________]
Address: [________________________________]
City/County, New Mexico [ZIP]: [________________________________]
(the "Employee")

RECITALS

WHEREAS, the Company is engaged in the business of [________________________________] in New Mexico and elsewhere (the "Business");

WHEREAS, the Company seeks to protect the following specifically identified interest, supported by the following facts: [________________________________];

WHEREAS, Employee will be employed by the Company in the position of [________________________________] and will perform the following duties connected to that interest: [________________________________];

WHEREAS, the consideration supporting this Agreement is identified in Section 3;

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the Parties agree as follows:

1. MANDATORY HEALTH CARE PRACTITIONER GATE

1.1 Health Care Practitioner Status. Employee ☐ IS / ☐ IS NOT a "health care practitioner" under NMSA 1978, § 24A-4-1(B): dentist, osteopathic physician, physician, podiatrist, certified registered nurse anesthetist, certified nurse practitioner, certified nurse-midwife, psychologist, physician assistant, or pharmacist.

1.2 Clinical-Services Noncompete. If Employee is a covered health care practitioner and the statutory applicability dates are satisfied, Section 5 does not restrict Employee's right to provide clinical health care services in New Mexico after termination of:

(a) this Agreement;

(b) a renewal or extension of this Agreement; or

(c) Employee's employment with the party seeking enforcement.

This limitation follows § 24A-4-2(A).

1.3 Nonsolicitation. For a covered practitioner, Section 6 shall last no more than one year after the last date of employment. Section 24A-4-3(C) states that the Act does not limit enforceability of patient/employee nonsolicitation of one year or less; all other enforceability requirements still apply.

1.4 Choice of Law and Forum. If this Agreement is for clinical health care services to be rendered in New Mexico, no term shall select another state's law or require litigation in another state. See § 24A-4-2(B).

1.5 Owner Agreements. Section 24A-4-5(A) excludes agreements between health care practitioners who are shareholders, owners, partners, or directors of a health care practice. Do not assume the exclusion applies merely because one party has an ownership or governance role; record counsel's analysis here: [________________________________].

1.6 Applicability Date. Counsel-confirmed execution-date analysis under § 24A-4-5(B)-(D): [________________________________].

2. DEFINITIONS

2.1 "Competing Business" means any person or entity that develops, markets, sells, or provides products or services substantially similar to or competitive with the Business of the Company in the Restricted Territory.

2.2 "Confidential Information" means specifically identified, non-public Company information that Employee receives through employment and that the Company protects from unauthorized disclosure. It excludes Employee's general skill and experience, public information, information lawfully received without a duty of confidentiality, and disclosures protected by law.

2.3 "Customer" means any person or entity that was a customer of the Company at any time during the [____]-month period preceding Employee's termination, or any prospective customer with whom Employee had material contact on behalf of the Company during the same period.

2.4 "Restricted Territory" means: [________________________________]

Choose one only after documenting why the selected area is no broader than reasonably required:

☐ Option A (Counties): The following New Mexico counties: [________________________________]

☐ Option B (Radius): A [____]-mile radius from the Company's principal place of business at [________________________________]

☐ Option C (Service Area): Each location at which Employee provided services or had material customer contact during the final [____] months of employment.

2.5 "Restricted Period" means [____] months following termination of Employee's employment. The drafter must document why this period is no longer than reasonably required; New Mexico law supplies no verified duration safe harbor for this form.

3. CONSIDERATION

(Select the applicable option:)

☐ At-hire: The specifically described consideration is: [________________________________].

☐ During employment: Employee receives the following new, specific consideration: [________________________________].

☐ At separation: Employee receives the following severance or other bargained-for benefit described in the identified separation agreement: [________________________________].

Counsel confirmation that the stated consideration is sufficient on these facts: [________________________________].

4. CONFIDENTIAL INFORMATION

Employee shall not use or disclose Confidential Information except to perform authorized duties for the Company or as applicable law permits. This duty continues only for as long as the information remains protected under applicable law or an enforceable contractual duty.

Defend Trade Secrets Act notice (18 U.S.C. § 1833(b)): An individual shall not be held criminally or civilly liable under federal or state trade-secret law for disclosing a trade secret (1) in confidence to a federal, state, or local government official, directly or indirectly, or to an attorney, and solely to report or investigate a suspected legal violation; or (2) in a complaint or other document filed under seal in a lawsuit or other proceeding. An individual suing an employer for retaliation for reporting a suspected legal violation may disclose the trade secret to the individual's attorney and use it in the proceeding if any document containing the trade secret is filed under seal and the trade secret is not disclosed except by court order.

5. NON-COMPETE [DO NOT USE FOR COVERED CLINICAL SERVICES AFTER A SECTION 1.2 EVENT]

During employment and for the Restricted Period, Employee shall not, directly or indirectly, within the Restricted Territory:

(a) own, manage, operate, or be employed by a Competing Business in a capacity substantially similar to Employee's role with the Company; or

(b) provide services to a Competing Business that involve use of the Company's Confidential Information or Customer relationships.

This Section applies only to the extent it is lawful and no broader than reasonably required to protect the interest identified in the Recitals. It does not apply when Section 1.2 makes it unenforceable. The Parties do not assume a court will rewrite an overbroad restriction.

6. NON-SOLICITATION

6.1 Customers or Patients. During the shorter of the Restricted Period or [____] months after the last date of employment, Employee shall not directly solicit a Customer with whom Employee had material work-related contact during the [____] months before employment ended, for the purpose of providing the specifically identified competing products or services: [________________________________].

6.2 Employees. During the shorter of the Restricted Period or [____] months after the last date of employment, Employee shall not directly solicit an employee with whom Employee materially worked during the [____] months before employment ended to leave the Company for a specifically identified competing role.

Covered-practitioner limit: Each blank in Sections 6.1 and 6.2 must be one year or less. Section 24A-4-3(C) preserves such a provision from limitation by the Act but does not guarantee enforcement under other law.

7. OPTIONAL REPAYMENT PROVISION — COUNSEL REVIEW REQUIRED

If a covered health care practitioner works for the Company for an initial period of less than three years, § 24A-4-3(A) states that the Act does not limit enforceability of an agreement requiring repayment of all or part of the listed categories below. Complete only actual, documented amounts and obtain review under all other applicable law:

(a) Relocation expenses paid by Company: $[____];

(b) Signing bonus: $[____];

(c) Recruiting, education, and training expenses: $[____];

(d) Outstanding loan balance (if any): $[____].

Trigger, allocation or amortization, amount due, and payment timing: [________________________________]. Nothing in this Section requires repayment prohibited by other applicable law.

8. LIQUIDATED DAMAGES

For breach of [IDENTIFY ENFORCEABLE DUTY], the agreed liquidated amount is $[____]. The supporting estimate of anticipated harm and explanation of difficulty proving the amount of loss at execution are: [________________________________]. Under § 24A-4-4, an agreement may provide for an amount reasonable at execution in light of those considerations, while an unreasonably large amount is void as a penalty. This Section does not impose damages for conduct that § 24A-4-2(A) makes unenforceable.

9. REMEDIES

Either Party may seek relief available under applicable law upon the required facts, equitable showing, procedure, and security. No provision creates automatic entitlement to an injunction, presumes irreparable harm, or waives bond or other security. See Insure New Mexico, 2000-NMCA-018, ¶¶ 6-12, 19-25.

10. CHOICE OF LAW / VENUE

This Agreement is governed by New Mexico law. Subject to subject-matter jurisdiction and any separately reviewed enforceable dispute-resolution agreement, litigation shall be brought in a court located in New Mexico. Section 24A-4-2(B) independently invalidates the specified other-state law and litigation terms in an agreement for clinical health care services to be rendered in New Mexico.

11. SEVERABILITY

If a provision is held invalid or unenforceable, it shall be severed only to the extent applicable law permits, and the remainder shall continue only if it can operate lawfully without judicial rewriting of the invalid provision.

12. ENTIRE AGREEMENT / COUNTERPARTS

This Agreement constitutes the entire agreement of the Parties regarding restrictive covenants and supersedes prior oral or written agreements on that subject. It may be executed in counterparts and, to the extent applicable law permits, by electronic signature.

EXECUTION

Part C — Pre-Signing Checklist

☐ Confirmed whether Employee is one of the ten practitioners in § 24A-4-1(B)

☐ If covered: recorded agreement execution/renewal/extension dates and applied § 24A-4-5(B)-(D)

☐ If relying on § 24A-4-5(A): counsel confirmed the agreement is between qualifying practitioner shareholders, owners, partners, or directors

☐ If covered: Section 5 cannot restrict clinical health care services in New Mexico after a § 24A-4-2(A) termination event

☐ If covered: each patient/employee nonsolicitation period is one year or less after the last date of employment (§ 24A-4-3(C))

☐ If for clinical services rendered in New Mexico: no other-state law selection or required other-state litigation (§ 24A-4-2(B))

☐ Identified the concrete interest and evidence supporting each restriction

☐ Geographic scope tied to Employee's actual work, relationships, and competitive reach

☐ Duration individually justified; no safe-harbor assumption

☐ Scope limited to competitive activities (not all employment)

☐ Actual consideration documented and counsel-confirmed for timing and facts

☐ Confidentiality definition excludes general skill, public information, lawful receipt, and protected disclosures

☐ DTSA whistleblower notice included (18 U.S.C. § 1833(b))

☐ Any covered-practitioner repayment term matches an actual § 24A-4-3(A) category and has separate counsel review

☐ Any liquidated amount is supported by a contemporaneous estimate under § 24A-4-4 and does not enforce a prohibited restraint

☐ Remedies clause creates no automatic injunction, irreparable-harm presumption, or bond waiver

☐ Severability clause does not assume judicial reformation

☐ Employee given opportunity to consult independent counsel — documented

☐ Counterpart/e-signature language included without an unverified statutory claim

☐ Reviewed by New Mexico-licensed attorney before execution

☐ Removed all `` comments before delivery

Sources and References

• New Mexico Compilation Commission, current Chapter 24A (see Article 4, §§ 24A-4-1 through 24A-4-5): https://nmonesource.com/nmos/nmsa/en/18973/1/document.do
• Nichols v. Anderson, 1939-NMSC-028, 43 N.M. 296, 92 P.2d 781: https://nmonesource.com/nmos/nmsc/en/378901/1/document.do
• Lovelace Clinic v. Murphy, 1966-NMSC-165, 76 N.M. 645, 417 P.2d 450: https://nmonesource.com/nmos/nmsc/en/376923/1/document.do
• Insure New Mexico, LLC v. McGonigle, 2000-NMCA-018, 128 N.M. 611, 995 P.2d 1053: https://nmonesource.com/nmos/nmca/en/375578/1/document.do
• U.S. House, Office of the Law Revision Counsel, 18 U.S.C. § 1833: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title18-section1833&num=0&edition=prelim