M-Wakili

Ask a lawyer:
What are the most common mistakes to avoid when drafting a Non-Compete Agreement?

M-Wakili's Response

Non-compete agreements are a common feature in employment contracts in Kenya. They are designed to protect the legitimate interests of an employer by preventing a former employee from competing with them after their employment has ended. However, these agreements are subject to strict legal scrutiny in Kenya, and poorly drafted non-compete agreements can be unenforceable.

Table of Contents

  1. Introduction

  2. Common Mistakes to Avoid When Drafting a Non-Compete Agreement

    1. Overly Broad Scope

    2. Unreasonable Duration

    3. Unreasonable Geographic Scope

    4. Lack of Consideration

    5. Failure to Define Confidential Information

    6. Failure to Specify the Employer's Legitimate Interests

    7. Failure to Consider the Employee's Right to Earn a Living

    8. Failure to Obtain Legal Advice

  3. Case Laws

  4. Conclusion

  5. TLDR

Introduction

In Kenya, non-compete agreements are governed by the Contracts in Restraint of Trade Act, Cap 24 of the Laws of Kenya. This Act sets out the legal framework for the enforceability of such agreements. The Act states that a restraint of trade is void unless it is reasonable in the interests of the parties concerned and in the public interest.

Common Mistakes to Avoid When Drafting a Non-Compete Agreement

Here are some common mistakes to avoid when drafting a non-compete agreement in Kenya:

1. Overly Broad Scope

The scope of a non-compete agreement should be limited to the specific activities that the employer seeks to protect. It should not be overly broad or vague. For example, a non-compete agreement that prohibits an employee from working in any industry related to the employer's business would likely be considered unreasonable and unenforceable.

Sources:

  • Clyde & Co

2. Unreasonable Duration

The duration of a non-compete agreement should be reasonable and should not be longer than necessary to protect the employer's legitimate interests. A non-compete agreement that lasts for an indefinite period or for an unreasonably long period is likely to be considered unenforceable.

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3. Unreasonable Geographic Scope

The geographic scope of a non-compete agreement should be limited to the area where the employer's business operates. It should not be overly broad or extend to areas where the employer does not have a legitimate interest in protecting. For example, a non-compete agreement that prohibits an employee from working anywhere in Kenya would likely be considered unreasonable and unenforceable.

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4. Lack of Consideration

A non-compete agreement must be supported by consideration. This means that the employee must receive something of value in exchange for agreeing to the restrictions. For example, the employer may offer the employee a higher salary, a promotion, or other benefits.

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5. Failure to Define Confidential Information

A non-compete agreement should clearly define the confidential information that the employer seeks to protect. This information should be specific and should not be overly broad. For example, the agreement should specify the types of trade secrets, customer lists, or other confidential information that the employee is prohibited from disclosing or using.

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6. Failure to Specify the Employer's Legitimate Interests

A non-compete agreement should clearly specify the employer's legitimate interests that the agreement is designed to protect. These interests may include protecting trade secrets, customer relationships, or goodwill.

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7. Failure to Consider the Employee's Right to Earn a Living

A non-compete agreement should not be so restrictive that it prevents the employee from earning a living. The agreement should be reasonable and should not unduly restrict the employee's ability to find other employment.

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8. Failure to Obtain Legal Advice

It is always advisable to seek legal advice from a qualified lawyer before drafting or signing a non-compete agreement. A lawyer can help ensure that the agreement is drafted in a way that is legally enforceable and that it does not violate the employee's rights.

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Case Laws

Here are some relevant case laws on non-compete agreements in Kenya:

  • Karanja v. Kenya Commercial Bank Ltd (2003) eKLR

    • This case involved a former employee of Kenya Commercial Bank who was sued for breaching a non-compete agreement. The court held that the non-compete agreement was unreasonable and unenforceable because it was overly broad and restrictive. The court found that the agreement prohibited the employee from working in any capacity in the banking industry, which was too broad and unreasonable.

    • This case highlights the importance of ensuring that the scope of a non-compete agreement is reasonable and limited to the specific activities that the employer seeks to protect.

  • Kenya Airways Ltd v. Mbugua (2008) eKLR

    • This case involved a former employee of Kenya Airways who was sued for breaching a non-compete agreement. The court held that the non-compete agreement was enforceable because it was reasonable and necessary to protect the employer's legitimate interests. The court found that the agreement was limited in scope, duration, and geographic area, and that it was necessary to protect the employer's trade secrets and customer relationships.

    • This case highlights the importance of drafting a non-compete agreement that is reasonable and necessary to protect the employer's legitimate interests.

Conclusion

Non-compete agreements can be a valuable tool for employers in Kenya, but they must be carefully drafted to avoid legal challenges. Employers should seek legal advice from a qualified lawyer before drafting or signing a non-compete agreement.

TLDR

To avoid legal challenges, non-compete agreements in Kenya should be reasonable in scope, duration, and geographic area, and should be supported by consideration. They should also clearly define confidential information, specify the employer's legitimate interests, and consider the employee's right to earn a living.

Answered by mwakili.com