The enforceability of restrictive covenants, both in Delaware and across the country, is an issue in a state of flux. A recent decision by the Delaware Court of Chancery serves to highlight the court’s hesitance to enforce noncompetes in Delaware and the rule recently proposed by the FTC would eliminate noncompetes entirely.

Unreasonable Covenants Were Unenforceable

In Ainslie v. Cantor Fitzgerald, No. 9436-VCZ (Del. Ch. Jan. 4, 2023), the court evaluated several post-employment restrictions. The case involved several former partners who, according to their former employer, were subject to a one-year noncompete provision, a one-year prohibition on doing business with the company’s customers, and a two-year nonsolicitation provision. There was no geographic limitation on any of the covenants, meaning the former partners could not join any competitor, regardless of the competitor’s location. The covenants protected not only the employer but its subsidiaries and affiliates, as well. The partners’ contracts also contained a “forfeiture-for-competition” provision, which provided they would have to forfeit certain compensation if they violated their restrictive covenants.

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