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What you need to know about non-competition agreements

On Behalf of | May 31, 2016 | Business Organizations |

Having your “ducks in a row” is absolutely critical when running a business. If you aren’t handling important issues in a timely manner, or if your documents lack the compliance and completeness that they need to be enforceable, then your company could be at risk. We could write pages and pages on this topic, but today we’re just going to look at a small piece of what we are talking about. Today, let’s talk about non-competition agreements.

Many companies make their new employees sign non-competition agreements when they are hired. These contracts tell the employee that they are forbidden from revealing trade secrets and company information to competitors and other companies. In exchange, the individual is given employment.

These non-competition agreements can’t be so rigid and punishing, though, so as to make it impossible for the employee to move on to a different company. If your non-competition agreement is framed in this way, it is unlikely to hold up in court if the employee challenged its legality.

To ensure compliance, frame the contract in a reasonable way. Don’t restrict the employee’s ability to find new work in excessive ways. The scope of the contract shouldn’t be for too long, nor should it limit the person’s ability to find work based on geography. Also, make sure you clearly define the business interest that is being protected in the non-competition agreement. If the interest is too vague, a judge is unlikely to see the company’s side of the NCA.

Source: FindLaw, “Non-Competition Agreements: Overview,” Accessed May 31, 2016