If you own your own business, chances are you have thought about non-compete agreements. What are they? Do I need one for my business? What should it include? These are all important questions to discuss with your business attorney. Join us to look at basic information about a non-compete agreement to get you on the road to solid contracts.

What Is A Non-Compete Agreement?

A non-compete agreement is a document or part of a contract that protects any sensitive or proprietary business information. This document acts as a legal agreement between employer and employee that prevents the employee from entering into a competing business venture during or after employment. Usually, the non-compete agreement includes a specified period of time. This means that the employee can neither start a competitive business nor become employed with an already competitive business. Often for a set period of time and within a certain radial distance of the original business. Non-compete agreements come into a play once you end the employer-employee relationship, for whatever reason that may occur.

Pros and Cons

Non-Compete Agreements are beneficial in that they can protect your business’s trade secrets and proprietary information in the event of employee turnover. They can also help to prevent employee turnover, as those who have signed these agreements are less likely to leave knowing that they cannot immediately seek employment with a nearby competitor. These non-compete agreements also encourage employers to provide additional training to their employees, knowing that such the information cannot get out. This also means that the quality of the work being done will greatly improve over time with the additional training of employees, thus creating an even greater incentive for all involved.

On the other hand, non-compete agreements can cause a worker who becomes disenfranchised to leave a specialized field all together, as they cannot compete, taking their valuable knowledge with them. For employers, the court dismisses an overbroad or poorly executed non-compete agreement. This is why it is important to consult with your attorney when drafting a non-compete agreement.

What to Include

When you are drafting your non-compete agreement, there are a few things to remember.

  1. Do not assume that one size fits all. This means that a non-compete agreement for one business might not fit your business. You need to tailor these contracts to your business.
  2. Ensure that anyone who signs this agreement has access to sensitive or proprietary information. Your non-compete agreement can get thrown out of court for being too broad. The court consider such agreements overbroad and overly restrictive.
  3. Keep the timeframe and region reasonable and narrow. For an enforceable non-compete agreement, the restrictions you place on workers cannot be too broad or too limiting.
  4. Provide consideration for the agreement. If you have your active employees sign non-compete agreements after they are already hired, you must give them something in return for signing. If the signing is part of the initial job offer, then that is consideration enough. However, if they are already employed with you, considerations must be made, such as a promotion, special bonus payment, or even a stock grant can be valid considerations.