Will an Idaho court enforce this employee or independent-contractor non-competition covenant?
Yes, if the covenant is with a "key employee" or "key independent contractor" and is reasonable as to duration, geographic area, and type of employment or line of business. Idaho's statute is itself the enforceability test: "A key employee or key independent contractor may enter into a written agreement or covenant that protects the employer’s legitimate business interests and prohibits the key employee or key independent contractor from engaging in employment or a line of business that is in direct competition with the employer’s business after termination of employment, and the same shall be enforceable, if the agreement or covenant is reasonable as to its duration, geographical area, type of employment or line of business, and does not impose a greater restraint than is reasonably necessary to protect the employer’s legitimate business interests" (Idaho Code § 44-2701). The statute then supplies three REBUTTABLE presumptions of reasonableness that a drafter can lean on: a postemployment term of 18 months or less is presumed reasonable as to duration (§ 44-2704(2)); a restriction limited to the areas where the covenanted employee actually worked or had a significant presence is presumed reasonable as to geography (§ 44-2704(3)); and a restriction limited to the type of employment or line of business the employee actually conducted is presumed reasonable as to scope (§ 44-2704(4)). "Key employee" and "key independent contractor" are themselves defined broadly, by the inside knowledge and influence an employee gains through "exposure to technologies, intellectual property, business plans, business processes and methods of operation, customers, vendors or other business relationships" and the resulting "ability to harm or threaten an employer’s legitimate business interests" (§ 44-2702(1)), with "legitimate business interests" defined in (2) to include goodwill, customer lists and trade secrets, and the statute adds its own rebuttable presumption on WHO counts as key: "It shall be a rebuttable presumption that an employee or independent contractor who is among the highest paid five percent (5%) of the employer’s employees or independent contractors is a \"key employee\" or a \"key independent contractor\"" (§ 44-2704(5)), and it says what rebutting that one takes: the employee or contractor "must show that it has no ability to adversely affect the employer’s legitimate business interests." The chapter has been construed by the Idaho Supreme Court. In Blaskiewicz v. Spine Institute of Idaho the Court held that a district court which decided a non-compete on the older common-law cases alone had committed "clear error", because "at no point in its memorandum decision did the district court cite or analyze the statutes governing non-compete agreements in Idaho"; the older cases "remain instructive", but the statutes govern, and the summary judgment striking the covenant was vacated. Industrial Commission v. Sky Down Skydiving confirms the statute reaches contractors as well, holding that "non-competition clauses are permitted for independent contractors under Idaho Code section 44-2701" in an appeal over whether a skydiving operator had "improperly designated its tandem skydiving instructors and parachute packers as independent contractors, rather than as employees"; the covenants there ran 18 months and 100 miles.
The trap
The 18-month, geography, and scope presumptions in § 44-2704 are REBUTTABLE, not safe harbors: a covenant inside those lines is only presumed reasonable, and the employee can still put on evidence to rebut the presumption; nothing in the statute makes an 18-month, narrowly-drawn covenant automatically enforceable. The reverse trap is sharper: exceed 18 months and the covenant is not merely unpresumed, it fails outright UNLESS the employer gives consideration beyond employment or continued employment: § 44-2704(1) says a covenant "[u]nder no circumstances" may exceed 18 months "unless consideration, in addition to employment or continued employment, is given." Losing the covenant is not the same as losing every protection, though: the same subsection adds that "[n]othing in this chapter shall be construed to limit a party’s ability to otherwise protect trade secrets or other information deemed proprietary or confidential." A court asked to enforce an over-length covenant against a below-top-5%-earner employee, with no separate consideration recited, is being asked to enforce a covenant the statute does not presume reasonable at all. Separately, an unreasonable covenant is not simply void in Idaho (§ 44-2703 directs the court to BLUE-PENCIL it: "a court shall limit or modify the agreement or covenant as it shall determine necessary to reflect the intent of the parties and render it reasonable... and specifically enforce the agreement or covenant as limited or modified"), so an overbroad covenant is a live liability, reformed and enforced against the employee, not a dead letter. Sky Down Skydiving's reference to § 44-2701 arose in an unrelated workers'-compensation employee-classification dispute, not a covenant-enforcement action; it confirms the statute reaches independent contractors but does not state the reasonableness test itself. And although § 44-2703 is written as a command, no decision read here shows an Idaho court actually rewriting a covenant: Blaskiewicz says only that "even if the provision is too broad, the district court had within its power the ability to limit or modify the non-compete provision through blue-penciling", and it vacated the judgment rather than narrowing the covenant itself, so what an Idaho court will actually write into an overbroad covenant is a question no decision read here answers.
16 authorities
- statuteIdaho Code § 44-2701enactment date not established
The words that state the rule
A key employee or key independent contractor may enter into a written agreement or covenant that protects the employer’s legitimate business interests and prohibits the key employee or key independent contractor from engaging in employment or a line of business that is in direct competition with the employer’s business after termination of employment, and the same shall be enforceable, if the agreement or covenant is reasonable as to its duration, geographical area, type of employment or line of business, and does not impose a greater restraint than is reasonably necessary to protect the employer’s legitimate business interests.
- statuteIdaho Code § 44-2704enactment date not established
The words that state the rule
Under no circumstances shall a provision of such agreement or covenant, as set forth herein, establish a postemployment restriction of direct competition that exceeds a period of eighteen (18) months from the time of the key employee’s or key independent contractor’s termination unless consideration, in addition to employment or continued employment, is given to a key employee or key independent contractor. Nothing in this chapter shall be construed to limit a party’s ability to otherwise protect trade secrets or other information deemed proprietary or confidential.
- statuteIdaho Code § 44-2704enactment date not established
The words that state the rule
(2) It shall be a rebuttable presumption that an agreement or covenant with a postemployment term of eighteen (18) months or less is reasonable as to duration.
- statuteIdaho Code § 44-2704enactment date not established
The words that state the rule
(3) It shall be a rebuttable presumption that an agreement or covenant is reasonable as to geographic area if it is restricted to the geographic areas in which the key employee or key independent contractor provided services or had a significant presence or influence.
- statuteIdaho Code § 44-2704enactment date not established
The words that state the rule
(4) It shall be a rebuttable presumption that an agreement or covenant is reasonable as to type of employment or line of business if it is limited to the type of employment or line of business conducted by the key employee or key independent contractor, as defined in section 44-2702, Idaho Code, while working for the employer.
- statuteIdaho Code § 44-2704enactment date not established
The words that state the rule
It shall be a rebuttable presumption that an employee or independent contractor who is among the highest paid five percent (5%) of the employer’s employees or independent contractors is a "key employee" or a "key independent contractor." To rebut such presumption, an employee or independent contractor must show that it has no ability to adversely affect the employer’s legitimate business interests.
- statuteIdaho Code § 44-2703enactment date not established
The words that state the rule
To the extent any such agreement or covenant is found to be unreasonable in any respect, a court shall limit or modify the agreement or covenant as it shall determine necessary to reflect the intent of the parties and render it reasonable in light of the circumstances in which it was made and specifically enforce the agreement or covenant as limited or modified.
The words that state the rule
This appeal concerns whether Sky Down Skydiving, LLC, improperly designated its tandem skydiving instructors and parachute packers as independent contractors, rather than as employees, thereby eliminating the need for worker’s compensation insurance.
The words that state the rule
Although non-competition clauses are permitted for independent contractors under Idaho Code section 44-2701, such a provision is more indicative of the type of control an employer typically exercises over an employee. The noncompete agreements at issue here restricted any tandem instructor’s or parachute packer’s ability to terminate his employment with Sky Down and it eliminated their opportunity to continue skydiving work within 100 miles of Sky Down for 18 months following the contract’s termination.
The words that state the rule
For the foregoing reasons we reverse the decision of the district court and remand with instructions to remand the case to the magistrate court for a new trial. Costs are awarded to the Industrial Commission.
- statuteIdaho Code § 44-2702enactment date not established
The words that state the rule
"Key employees" and "key independent contractors" shall include those employees or independent contractors who, by reason of the employer’s investment of time, money, trust, exposure to the public, or exposure to technologies, intellectual property, business plans, business processes and methods of operation, customers, vendors or other business relationships during the course of employment, have gained a high level of inside knowledge, influence, credibility, notoriety, fame, reputation or public persona as a representative or spokesperson of the employer and, as a result, have the ability to harm or threaten an employer’s legitimate business interests.
- statuteIdaho Code § 44-2702enactment date not established
The words that state the rule
"Legitimate business interests" shall include, but not be limited to, an employer’s goodwill, technologies, intellectual property, business plans, business processes and methods of operation, customers, customer lists, customer contacts and referral sources, vendors and vendor contacts, financial and marketing information, and trade secrets as that term is defined by chapter 8, title 48, Idaho Code.
- caseNo. 48785 (Idaho Oct. 31, 2022)Blaskiewicz v. Spine Institute of IdahoIdahodecided 2022
The words that state the rule
The legislature has further enacted a list of rebuttable presumptions with respect to whether the duration, geographical area, and type of employment are reasonable.
- caseNo. 48785 (Idaho Oct. 31, 2022)Blaskiewicz v. Spine Institute of IdahoIdahodecided 2022
The words that state the rule
Based on the district court’s failure to even address the applicability of the relevant Idaho statutes, we hold that the district court erred in granting summary judgment in favor of Blaskiewicz. It should first be noted that, at no point in its memorandum decision did the district court cite or analyze the statutes governing non-compete agreements in Idaho. Rather, the district court relied on Intermountain Eye and Freiburger, both of which pre-date the enactment of these statutes. See Intermountain Eye, 142 Idaho 218, 127 P.3d 121; Freiburger, 141 Idaho 415, 111 P.3d 100. While Intermountain Eye and Freiburger remain instructive, the district court’s failure to address the relevant statutes constitutes clear error.
- caseNo. 48785 (Idaho Oct. 31, 2022)Blaskiewicz v. Spine Institute of IdahoIdahodecided 2022
The words that state the rule
However, even if the provision is too broad, the district court had within its power the ability to limit or modify the non-compete provision through blue-penciling.
- caseNo. 48785 (Idaho Oct. 31, 2022)Blaskiewicz v. Spine Institute of IdahoIdahodecided 2022
The words that state the rule
For the foregoing reasons, we vacate the district court’s grant of summary judgment and remand the case for further proceedings.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.