Will your NCAs be enforced? Noncompete tips for NM employers

Many employers fear entrusting an employee to help them build a book of business only to have the employee take the clients to a competitor. To protect themselves, some employers require certain employees to sign noncompete agreements (NCAs).

NCAs are valid and enforceable in New Mexico. However, our courts are mindful of the inherent conflict between two important interests: the freedom to contract and the freedom to work. As such, an NCA will be upheld only when the restraints placed on the employee are reasonable. The question of what is reasonable depends on the facts of a particular case.

What is reasonable?

An NCA must have reasonable restrictions with respect to time and geography. For example, I recently reviewed an NCA that would've restricted an employee from working in the same industry as her current employer in more than a dozen states even though the employer operates in only a few of those states. Had the NCA been challenged and reviewed by a court, I think the employer would have had a hard time arguing the geographical limitation was reasonable.

So what is reasonable? If an employee is a salesperson who covers a particular geographical territory, it would probably be reasonable to prohibit her from competing in that territory. If the employee works out of a single location, an NCA that would keep her from competing within a range of 15 or 20 miles from the office would likely be enforced. But again, it depends on the circumstances of the employment. As one court put it, the “restraint must not be greater than necessary to protect the employer's legitimate interest.”