Can Your Business Use Forfeiture Provisions to Replace Controversial Non-Competes?

by Prof. Robert Bloink and Prof. William H. Byrnes

With or without the Federal Trade Commission (FTC) ban on non-compete agreements, nearly every state will refuse to enforce non-compete agreements that do not satisfy a reasonableness standard (some states refuse to enforce non-compete agreements regardless of whether they are considered “reasonable”). Recently, the Seventh Circuit issued a ruling that highlights the distinction between a non-compete agreement and a forfeiture-for-competition provision—noting that the forfeiture-for competition may not be subject to the reasonableness test. Understanding the facts, however, is key to determining whether any given forfeiture agreement will be enforced.

Non-Compete vs. Forfeiture-for-Competition