Those coming into a company will often sign a mountain of paperwork. One of the documents in that pile is a non-compete agreement. The company’s goal in asking employees to sign these agreements is to restrict competing businesses from poaching company talent as well as accessing proprietary information and trade secrets. However, these contracts can be at odds with the employee’s right to earn a living.
Not all contracts are binding
A poorly drafted non-compete agreement will likely not hold up before a judge. Therefore it is useless. When creating a binding contract, the rule of thumb is to focus on valid business concerns rather than attempting to secure punitive damage. Valid issues include:
- A profitable company-customer relationship is impacted by the employee’s departure.
- Company secrets regarding pricing, services, business practices and products.
- Proprietary information that is not a trade secret.
- Special training provided to the employee to do their job.
Best to be reasonable
The best non-compete agreements are not overly restrictive regardless of length, scope of work, and territory involved. These details will vary depending upon how specialized the employee’s skill set is and what the business does. A general rule of thumb is that they should not apply for more than a few years. Anything more restrictive hinders a worker’s ability to earn a living. Conversely, not using one would enable the competitor to step in and take away business.
Businesses change over time
No wants to see good employees go to competitors, but those few years can be long enough. Companies will change over time, creating new products and services as well as new, more efficient processes for doing things. By the time the non-compete is complete, the information likely is not as valuable as it once was.
Those with questions about drafting a binding non-compete can consult with a knowledgeable business law attorney. They can discuss the details of a client’s business and help them determine a workable contract. Conversely, they can also discuss these issues with the former employee and fight an unfair or overly restrictive non-compete agreement.