A non-compete agreement is an agreement between an employer and employee stating that the employee will not leave the company and then work for the competition. These agreements also usually prohibit the employee from starting a similar company on their own.
The idea is that businesses want to make sure that they keep their best talent. You don’t want to teach someone how to build a company that is going to take your customers, nor do you want them to find inside information and then go to the competition with that information. But can you use these agreements for all of your employees? Or are there any stipulations you should be aware of?
Courts may not uphold a non-compete that’s unreasonable or unnecessary
The big thing to remember is that a non-compete agreement has to be reasonable, and it has to fit within a specific scope. For instance, the agreement may only last for a year or only apply within a certain radius of the business. It also has to be put in place to legitimately protect your business, not just to keep your employees from leaving.
For example, a bar that uses non-compete agreements for its waitstaff may find that the court isn’t going to uphold those because these waiters and waitresses need to be able to make a living. The company isn’t really losing anything if a waiter goes and works somewhere else, so it’s unreasonable. However, a major tech company may be able to use a non-compete with a high-level executive who has access to company secrets. It makes sense to protect those secrets.
If you’re considering non-compete agreements and other ways to keep your business running smoothly, just be sure of the legal steps you’ll need to take to make sure that they’re actually going to stand if this case goes to court.