Depending on the type of company you run, you may have certain secrets you want to keep within the confines of the organization. You do not want current employees divulging these secrets to outside agencies to make some quick cash. There is also the possibility that one of your employees will quit at some point, get a job with one of your competitors and divulge secrets in order to give this other company an advantage over you. For these reasons, many employers have discovered the benefits of having workers sign a non-compete agreement.
What Is a non-compete Agreement?
A non-compete agreement essentially states that a person cannot work for a direct competitor of an organization for a given amount of time after leaving said business. It also generally contains information stating that the employee will not reveal any secrets while they are under the employ of the company. These contracts are designed to protect crucial information belonging to an organization, such as client lists, sales strategies and product details. While these contracts can be useful, many employers make the mistake of wording them incorrectly, effectively making them unenforceable. There are a few ways you can customize your company’s agreement to actually make it enforceable.
The Agreement Has to Be Reasonable
Former employees may bring you to court over an unfair non-compete agreement. Therefore, there are three factors you should consider when crafting your own:
- The kinds of business the employee is prohibited from working at
- The geographic location they are not allowed to work within
- The length of time the agreement is valid for
If a former worker brings you to court over an unfair non-compete agreement, the judge will look at all of these carefully. Although it is understandable why you would want someone to sign this kind of contract, you do not want it to ask for too much, making to it so your former employees are unable to work anywhere. For example, you cannot make the agreement vague to the point where a person would be unable to work in most industries, including ones that are not particularly relevant to your company.
Additionally, you cannot specify that someone is unable to work within an excessively large geographic area after their employment with you ends. You cannot forbid someone from working in a whole state or group of states. Finally, most courts will only accept non-compete agreements as valid if they are good for two years or less. You cannot make an agreement last a lifetime.
The Employee Has to Benefit
One essential aspect of most contracts is that both parties are benefiting from it. If you are making someone sign a non-compete agreement before they start working for you, then the benefit to the prospective employee would be that they are getting a job offer. However, you may realize that you want some of your current workers to sign the agreement. In this case, they may not sign it if there is nothing in it for them. Therefore, it would be in your best interest to offer that individual a promotion or an increase in pay. If a court sees that the employee did not gain anything from the agreement, it may be thrown out.
It Makes Sense for the Individual to Sign It
Your business may have some trade secrets to keep hidden, but that does not mean everyone who works for you has to sign a non-compete agreement. Only people who have access to the secrets should sign the document. Making people who are not privy to the information sign a non-compete agreement only punishes them once they leave your company.
Certain states like California have additional laws concerning non-compete agreements. Make sure you understand the legalities of these types of contracts before having any of your employees sign them.
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