A non-compete agreement is a legally-binding clause, often part of an employment contract, that limits the industry and region in which an individual may work after his or her employment with a specific company has ended. Many companies require all new employees to sign these agreements at their time of hiring. This is done to protect the company’s investment in its employees and the carefully curated and developed information it uses to maintain its competitive edge in its industry. If your company makes use of sensitive information or developments or invests a significant amount of time, money, and resources in its employees, consider making use of non-compete agreements as a way to protect yourself from competition within your industry.
There are certain rules that your company must abide by when developing non-compete agreements for its employees. If your agreement violates state or federal law for this type of clause, your agreement may be found to be unenforceable. Work with a competent legal professional to develop non-compete agreements and other legally-binding documents for your company.
Protection of Business Interests
The primary purpose of a non-compete agreement is to protect business interests. These can include any of the following:
- Confidential trade information;
- Unreleased inventions, patents, innovations, names, recipes, models, algorithms, or creative materials;
- Client lists; and
- Company policies and transaction methods.
When an employee signs a non-compete agreement, he or she often agrees to refrain from discussing the aforementioned topics with future employers. An agreement may also prohibit an individual from accepting work from a competitor in the industry or the region for a specified time after he or she leaves the company.
Reasonableness of a Non-Compete Agreement
Your non-compete agreement may be void if the court determines its restrictions to be unreasonable. To determine whether or not a document is reasonable, consider the following:
- What is its focus? Why did you feel the need to draft a non-compete agreement for this position?
- What is the position it’s written for? Does the individual in this position have access to the information you need to protect from competitors or hold specialized skills that could be used to undermine your company in the future?
- How wide is the radius where he or she may not accept work in the industry? Is it beyond the range of your company’s actual competitors?
- How long is the individual prohibited from accepting work in the industry? Is this length of time so long that it would negatively impact the employee’s career?
Draft a Non-Compete Agreement that Meets All Parties’ Needs
Requiring new employees to sign a non-compete agreement can be a valuable tool to protect your company. Contact Virtual Paralegal Services at 888-600-4992 to learn more about how we support clients with non-competes and other labor and employment needs.