A non compete agreement is a written legal contract between an employer and employee. The non compete agreement lays out binding terms and conditions about the employee's ability to work in the same industry and with competing organizations upon employment termination from the current employer. Generally, the non-compete agreement states that the employee may not work for a competing firm for six months to two years following employment ending.
Employers Benefit From a Non Compete Agreement
Employers benefit from non compete agreements because they keep a former employee from sharing industry experience, knowledge, trade secrets, client lists, strategic plans, and other information that is confidential and proprietary to the employer with competitors.
Employees Benefit From a Non Compete Agreement
Employees benefit from non compete agreements because they receive something of value in return for signing the non compete. In most cases the item of value is the job. Current employees may also be asked to belatedly sign a non compete agreement. A promotion or raise in return for the signature also qualifies as something of value.
What Else Does a Non Compete Agreement Cover?
A non compete may also cover additional factors such as limiting a former employee's ability to recruit the employer's staff to a competing enterprise. A non compete frequently prohibits the former employee from calling on customers of the employer and prohibits the use of sales leads obtained while employed. A non compete may also disallow employment in a particular region of the country. A non compete almost always prohibits the former employee from working on or developing similar products or starting a competing business.
Are Non Compete Agreements Legally Enforceable?
The legal system favors employees in non compete litigation. The courts interpret the employee's right to make a living as more important than enforcing the terms of a non compete.
In some states such as California, the courts will not enforce a non compete agreement. Other states limit the use of a non compete agreement, so check the laws in your state or country before creating a non compete agreement, if you want it to be enforceable.
Generally speaking, a non compete agreement that is not too restrictive in terms of length of time covered and the amount of territory covered is more enforceable. As an example, the six months to two years recommended earlier is rarely seen as too restrictive.
A non compete agreement that covers integral components of the actual job description and responsibilities is more enforceable. A non compete agreement that is tied directly to the possession of confidential and proprietary information, which if revealed, could seriously damage the former employer's business interests, is also more enforeable.
Finally, if the employer has provided something of value to the employee in return for signing the non compete, such as a job, the non compete will be more enforceable.
A non compete agreement should offer a clause that allows an employer to sign off on or give permission to the former employee to work for a particular firm, in a particular region, to cooperatively start a competing business, and so forth. This will be valuable if you leave to start an enterprise that might be viewed as competition, but it is located ten states away, and poses no competitive problems.
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