As an employer, you know that employees don’t always stay with one company for their entire career. Thus, you want to be sure that you protect valuable, confidential information about your company if and when certain employees move on. A non-compete agreement can be a powerful tool that can help you do this.
However, it is not typically necessary for all employees to be bound by this type of contract. If you hire someone or renegotiate an employee’s contract, consider the following questions when determining whether you should include a non-compete clause in an employment agreement.
- What will their role be? Courts generally discourage contracts that unfairly restrict opportunities for people like hourly workers and employees who are at low risk for sharing proprietary information.
- Do you have information worth protecting? These agreements protect confidential information that gives a business a competitive edge from being shared with the public and competitors. If there is no such information involved, a non-compete can be unnecessary.
- What access will they have? Even if you have proprietary information available to some of your employees, if the person you are hiring will not have that access, there may be no reason to restrict their future employment opportunities.
- Where will they be working? State laws vary widely in terms of recognizing non-compete agreements. While they are enforceable in states like Texas, other states limit enforceability, and a few ban them altogether.
Based on the answers to these questions, you can determine whether there is information worth protecting – and a reason to protect it.
Keep in mind that if you do have employees sign non-compete agreements, you could still face legal challenges. This could happen if an employee contests the contract because they allege it is unfair or unenforceable, or if you believe the employee violated the contract’s terms and you want to enforce them.
Non-compete agreements and clauses may seem fairly standard and straightforward. However, complications can arise when it comes to determining who should have one, how to draft one and when to enforce it, which is why legal guidance can be crucial.