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What are the most common mistakes to avoid when drafting a Non-Compete Agreement?
Introduction
Drafting a Non-Compete Agreement (NCA) in Kenya requires careful consideration of various legal principles and statutory provisions to ensure that the agreement is enforceable and fair. The primary sources of law governing NCAs in Kenya include the Constitution of Kenya, 2010, the Employment Act, 2007, and relevant case law. This response will outline the most common mistakes to avoid when drafting a Non-Compete Agreement, referencing the applicable legal provisions and principles.
Table of Contents
Legal Framework
1.1 Constitution of Kenya, 2010
1.2 Employment Act, 2007
1.3 Relevant Case Law
Common Mistakes to Avoid
2.1 Overly Broad Restrictions
2.2 Lack of Consideration
2.3 Unreasonable Duration
2.4 Unreasonable Geographic Scope
2.5 Failure to Define Legitimate Business Interests
2.6 Ambiguous Language
2.7 Ignoring Employee's Right to Work
2.8 Failure to Update the Agreement
2.9 Inadequate Legal Review
Conclusion
1. Legal Framework
1.1 Constitution of Kenya, 2010
Article 41: This article guarantees every person the right to fair labour practices. Any NCA must align with this constitutional right to be enforceable.
Article 24: This article provides for the limitation of rights and fundamental freedoms. Any restriction imposed by an NCA must be reasonable and justifiable in an open and democratic society.
1.2 Employment Act, 2007
Section 5: This section emphasizes the promotion of equality of opportunity in employment and the elimination of discrimination. An NCA should not unfairly discriminate against an employee.
Section 10: This section requires that the terms of employment be clearly stated and agreed upon by both parties. This includes any restrictive covenants such as NCAs.
1.3 Relevant Case Law
Case Law: Kenyan courts have addressed the enforceability of NCAs in various cases. For instance, in the case of Nairobi Java House Limited v. Mandela Auto Spares Limited & 2 others [2017] eKLR, the court emphasized the need for NCAs to be reasonable in scope and duration.
2. Common Mistakes to Avoid
2.1 Overly Broad Restrictions
Explanation: An NCA that imposes overly broad restrictions on an employee's ability to work is likely to be deemed unenforceable. The restrictions must be specific and tailored to protect legitimate business interests.
Legal Reference: Article 24 of the Constitution of Kenya, 2010, requires that any limitation on rights be reasonable and justifiable.
2.2 Lack of Consideration
Explanation: For an NCA to be enforceable, there must be adequate consideration provided to the employee. This could be in the form of employment, a promotion, or other benefits.
Legal Reference: Section 10 of the Employment Act, 2007, requires that the terms of employment, including any restrictive covenants, be clearly stated and agreed upon.
2.3 Unreasonable Duration
Explanation: An NCA that restricts an employee for an unreasonably long period is likely to be unenforceable. The duration should be reasonable and necessary to protect the employer's legitimate business interests.
Legal Reference: Article 24 of the Constitution of Kenya, 2010, requires that any limitation on rights be reasonable and justifiable.
2.4 Unreasonable Geographic Scope
Explanation: An NCA that imposes restrictions over an unreasonably large geographic area is likely to be deemed unenforceable. The geographic scope should be limited to the area necessary to protect the employer's legitimate business interests.
Legal Reference: Article 24 of the Constitution of Kenya, 2010, requires that any limitation on rights be reasonable and justifiable.
2.5 Failure to Define Legitimate Business Interests
Explanation: An NCA must clearly define the legitimate business interests it seeks to protect. This could include trade secrets, confidential information, or customer relationships.
Legal Reference: Section 10 of the Employment Act, 2007, requires that the terms of employment, including any restrictive covenants, be clearly stated and agreed upon.
2.6 Ambiguous Language
Explanation: An NCA with ambiguous or unclear language is likely to be unenforceable. The terms and conditions must be clearly defined and understandable to both parties.
Legal Reference: Section 10 of the Employment Act, 2007, requires that the terms of employment, including any restrictive covenants, be clearly stated and agreed upon.
2.7 Ignoring Employee's Right to Work
Explanation: An NCA that unduly restricts an employee's right to work and earn a livelihood is likely to be deemed unenforceable. The agreement must strike a balance between protecting the employer's interests and the employee's right to work.
Legal Reference: Article 41 of the Constitution of Kenya, 2010, guarantees every person the right to fair labour practices.
2.8 Failure to Update the Agreement
Explanation: An NCA that is not regularly reviewed and updated to reflect changes in the business environment or employment relationship is likely to be unenforceable. Regular updates ensure that the agreement remains relevant and enforceable.
Legal Reference: Section 10 of the Employment Act, 2007, requires that the terms of employment, including any restrictive covenants, be clearly stated and agreed upon.
2.9 Inadequate Legal Review
Explanation: An NCA that has not been reviewed by a legal professional is likely to contain errors or omissions that could render it unenforceable. Legal review ensures that the agreement complies with all relevant laws and regulations.
Legal Reference: Section 10 of the Employment Act, 2007, requires that the terms of employment, including any restrictive covenants, be clearly stated and agreed upon.
Conclusion
Drafting a Non-Compete Agreement in Kenya requires careful consideration of various legal principles and statutory provisions to ensure that the agreement is enforceable and fair. By avoiding common mistakes such as overly broad restrictions, lack of consideration, unreasonable duration and geographic scope, failure to define legitimate business interests, ambiguous language, ignoring the employee's right to work, failure to update the agreement, and inadequate legal review, employers can create NCAs that protect their legitimate business interests while respecting the rights of employees. It is always advisable to seek legal counsel when drafting or reviewing an NCA to ensure compliance with all relevant laws and regulations.
Answered by mwakili.com