In setting up a business for long-term success, there are various agreements that you should consider putting in place. Some employers, for instance, use noncompete agreements to protect operational secrets, marketing strategies, and more. Noncompete agreements, however, do restrict an employee’s ability to seek other employment and, thus, due to the impinging on the right to work, these agreements must be drafted with great care and due consideration to what a court of law would find to be enforceable.
What Is a Noncompete Agreement?
A noncompete agreement is a legal contract established between an employee and an employer in which the employee agrees not to become a competitor of the employer’s both during and after the term of employment. Most noncompete agreements restrict an employee’s ability from either becoming a competitor of the business or working for a competitor of the business while employed or after the term of employment.
Usually, the restrictions of a noncompete agreement will come up after the employment relationship between an employer and an employee end and the employer wants to prevent the employee from taking all of the training and knowledge gained at the company to go and use for the benefit of a competitor in the same market or field. An employer may wish to put a noncompete agreement in place to protect the company from former employees going to competitors with sensitive information such as operational procedures, management structures and practices, as well as ideas and future products that may be in development and client lists and information.
Noncompete agreements, however, should be handled with great care. Courts can sometimes be suspicious of such agreements as unduly burdening a person’s right to work. In order to be enforceable, a noncompete agreement should be clear on the date upon which it will become effective. In addition to the start date for the agreement, the agreement should be clear on the reason that the agreement is being established. The time period in which the noncompete agreement will apply should also be set forth. The duration of the noncompete agreement should be reasonable and not unduly restrictive. It should not, therefore, continue in perpetuity. Furthermore, the geographic restrictions of the noncompete agreement should be reasonable as well. The agreement should also detail what the employee will receive in exchange for signing the agreement.
While sensitive, noncompete agreements can be useful for a number of reasons. First, of course, it can be effective at protecting the trade secrets of a company. It can also help reduce turnover of employees as employees may find it difficult to leave to find other suitable employment. The fact that employees are restricted from engaging in competition with the employer may also encourage the employer to invest in providing more training opportunities for employees as the employer will not have to worry about the employees taking the valuable knowledge gained in trainings to go on and use for the benefit of another business.
Business Law Attorney
Are you considering a noncompete agreement for your employees? Make sure the agreement is done right and, therefore, remains effective when you need it most. The team at Jones, Gregg, Creehan & Grace is here to provide your business with trusted legal counsel. Contact us today.