It makes sound business sense for companies to include non-compete agreements in their onboarding or exit package. The goal is to prevent proprietary information and trade secrets from falling into the hands of direct competitors. Nevertheless, turnover is unavoidable, and a binding or enforceable agreement can only go so far.
The contract that has the best chance of standing up in court is generally not overly restrictive. It should not prevent the employee from earning a living and advancing their career.
Businesses should avoid overreach
The guidelines of a non-compete agreement will vary from industry to industry, but a poorly worded or overly broad agreement will likely not be binding. Rather than punishing employees who leave, businesses must focus on valid issues that could hurt the company. It is also best to focus on direct competitors in the short term and in the same market versus an entire industry.
Essential elements of a non-compete
States will have different laws regarding non-compete agreements. They will often cover:
- Geography: This should reflect the size of the company’s market.
- Time: Longer than two years is generally unrealistic.
- Type of job: This could involve a similar position in the same market with the same pool of clients.
While non-compete agreements are different than non-disclosure agreements, concerned employers should take some solace in knowing that training and proprietary information not protecting intellectual property will change over time as products and services change and improve.
It pays to be specific
Because the job descriptions and industries vary, employers with questions or concerns about a non-compete agreement can get answers from attorneys with experience handling these types of contracts. If there is a potential for a dispute, the attorney examining the situation’s specifics can craft an effective agreement that has the best chance to stand up in court. They can also determine if litigation is a viable course of action for enforcing the contract.