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Non-Compete Clauses: Yes, They Can Be Enforced

It seems to be a common misconception that non-compete agreements are not enforceable in New Mexico. When we talk about non-compete agreements, the first question to ask is: To whom is the non-compete being applied? If a vendor or other business with access to your trade secret information, such as your customer lists, you can certainly require a non-compete on such vendor or other business especially as it relates to using your trade secret or confidential information to compete against your business. If the non-compete is being applied to an employee, then it must be reasonable.

Reasonableness is the Key Factor

To be enforceable in New Mexico, a non-compete agreement must be reasonable in all respects. The geographic area in which a person is not allowed to compete must be reasonable. The time period during which a person is not allowed to compete must be reasonable. The activity in which a person is not allowed to engage must be reasonable. The consideration given in exchange for a person’s agreement not to compete must be reasonable.

Unfortunately, there is no hard and fast rule for what “reasonable” means. As a general rule, the less specialized a position is, the more lenient the terms of the non-compete agreement must be to be considered reasonable. For example, a global company that is one of only a few companies that supply a particular and very specialized product could conceivably prohibit its key personnel from working anywhere in the world for any of the few other companies that supply that product. On the other hand, it may be unreasonable to prohibit a part-time cashier in a retail store from working in any other retail store, even one located next door.

To make a reasonable non-compete agreement, a business should carefully tailor its non-compete agreements to prohibit competition that actually hurts the business. First, what particular work does the employee perform for the company that, if the employee performed the same work for a competitor would harm the company? A non-compete agreement should restrict the employee only from engaging in that particular work for a competitor, and the non-compete agreement should certainly specify that using confidential or trade secret information is prohibited.

How small can the restrictive area be? If your business relies on its convenient location to attract customers, the restrictive area in the non-compete agreement might be unreasonable if it exceeds the business’s neighborhood.

How long should the restrictive time duration be? If your customers are unlikely to follow a departing employee to another business after that employee has not been in the business for a few months, a restrictive time period of one year might be unreasonable.

Fair Consideration is Also Important

Like all agreements, non-compete agreements need to have consideration, which is a fancy legal term for some sort of compensation for the restriction of a non-compete. However, unlike other types of agreements, the courts will look into the sufficiency of the consideration for someone’s promise not to compete — that is, was the compensation paid for the restriction reasonable? If the seller of a business promises not to compete with the buyer, the courts will assume that the seller was sufficiently compensated for his promise with the payment for his business. No such assumption applies when the person promising not to compete is an employee. Offering an existing employee continued at-will employment in exchange for a promise not to compete is probably not adequate consideration. On the other hand, if an initial offer of employment is contingent on a non-compete agreement, the offer of employment might be adequate consideration.

Again, the key to having an enforceable non-compete agreement is to make it as least restrictive as absolutely needed to protect your business. There is usually no need to have an agreement that prevents a person from earning a living in his or her field, and the courts probably won’t enforce such an agreement anyway. Remember, the goal of a non-compete agreement is to protect your business from losing its customers – not to punish an employee who has the audacity to leave your company’s employ.

Business Law Southwest, LLC (BLSW). Business Law That Makes Business Sense. A Slingshot company.


Why You Need To Probate Your Loved One’s Estate

Probating a WillWinding up the affairs of a loved one who has passed on is never the most pleasant endeavor when you are in the midst of grieving his or her loss. However, the sooner the process is started, the easier it will be and the sooner it will be over. Probate is the legal process by which your deceased loved one’s debts are paid and her property is distributed to her survivors. The following details the steps involved in, and the importance of, the probate process in New Mexico.

When should an estate be probated in New Mexico?

If a person resided in New Mexico or owned real property located in New Mexico at the time of his or her death, a probate should be opened in New Mexico.

What are the steps involved in a probate?

(1) A petition to be appointed as personal representative or administrator must be filed with the court, and a notice must be sent to all interested parties.

(2) After a hearing, the court will typically issue an order appointing the petitioner as personal representative or administrator of the estate and Letters Testamentary or Letters of Administration authorizing the petitioner to take control of the assets and affairs of the estate.

(3) With the Letters Testamentary, the personal representative may begin collecting and inventorying the estate’s assets, including bank accounts, insurance policies, personal property and real property.

(4) The personal representative is also responsible for notifying creditors by letter and/or publication of the passing of the deceased, which starts the clock running on the deadline for creditors to make claims against the assets of the estate.

(5) After gathering the assets and determining the debts of the estate, the personal representative distributes the required statutory personal and family allowances, if applicable, satisfies the debts of the estate, and distributes the assets of the estate to the beneficiaries.

Who can be appointed as personal representative?

If your loved one has left a will naming a willing and able personal representative, the court will typically appoint that person. If the person named in the will is unable or unwilling to serve, or if your loved one has died intestate (without a will), any person interested in the deceased’s estate can petition to be appointed personal representative. Usually a spouse or child of the deceased will petition the court to be appointed personal representative, but any heir or even creditor is an “interested person” authorized to petition the court to be named personal representative.

Why is it important to go through the probate process?

Only through the probate process can you legally transfer title of the deceased’s property to the intended beneficiaries. All too often, a child takes up residence in the deceased’s home without having legal title transferred to him or her by a personal representative. Even though it may be undisputed that Mom wanted her child to have the home, the home still legally belongs to the deceased’s estate–not to the child. An unknown creditor, whose claim might have been foreclosed if the estate were probated, could come out of the woodwork, and the home could be available to satisfy the claim. The deceased may owe taxes, which would have been addressed by the personal representative during the probate process, and a taxing authority could impose a lien against the property. Suddenly, the small amount of money the child saved by foregoing the probate process costs the child the house that his or her Mom wanted to leave to the child.

Perhaps the most important reason to probate an estate is to assure the orderly transfer of assets from one generation to the next. Feelings of unfairness often arise when one sibling perceives that his or her parent left more to another sibling. The supervised distribution of assets through the probate process adds legitimacy to the transfers of property, which will reduce the chances of litigation over how assets are distributed. Additionally, proper administration of the estate assures that the intended beneficiaries will obtain the legal title to property necessary, in turn, to pass that property to future generations.

How much does it cost to probate an estate?

The attorney fees and other professional fees, such as those charged by accountants, depend on the complexity of the estate. The fewer debts owed by the deceased and the fewer assets to be distributed, the lower the cost of administering the estate tends to be. In any event, the cost of probating your loved one’s estate will almost always be less than the cost of the legal nightmares that result from foregoing the probate process.

If you are in need of an attorney to help you probate a will and/or administrate a loved one’s estate in New Mexico, be sure to contact a probate attorney as soon as possible. Probating a will should not be procrastinated.



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