Non-compete agreements are a common issue for workers and employers today. In some fields, companies require that some or all of their employees sign contracts barring them from working for the competition for a certain amount of time after leaving the job. Many wonder about the enforceability of these agreements, especially those in “right to work” states. In this article, you will learn why some employers require these agreements, and you will also learn how they are enforced.
Employer Advantages of Non-Compete Agreements
While these agreements keep businesses from losing workers, they also work to protect a company’s sensitive information. If an employee can access this information, the company should take steps to keep them from sharing it with competitors.
Enforcing a Non-Compete Agreement
A non-compete agreement is a good way to protect a business’ trade secrets and other sensitive data. To be enforced, the agreement must have a legitimate purpose, provide some benefit to the employee, be reasonable in scope and time, and not violate public policies.
Business purpose: Some of the most common reasons employees are asked to sign non-competes are to protect trade secrets, pricing or customer information, and to have time to effectively train new employees.
Employee benefit: To be enforceable, the employee must benefit from the signing of the agreement. To negate this factor, most agreements are signed before hiring, but most employers provide consideration anyway.
An effective agreement is reasonable in scope and time. The main factor is the length of the agreement, and courts refuse to enforce agreements that are too long. When drafting an agreement, a non-compete agreement lawyer can help employers ensure that their business needs are met.
Courts also make sure that non-compete agreements are reasonable in scope, which includes prohibited work and geographic area. Employers should take care that the geographic area is only as broad as necessary to protect their business. Scope depends largely upon the industry and the specific job.
Public Policy Worries
The final factor considered by the courts is whether an agreement violates public policy. For instance, an agreement that keeps a person from working in their chosen field entirely won’t be enforced. For certain professions (such as doctors) courts are less likely to enforce agreements because public policy dictates that consumers should have greater choice. A non-compete agreement lawyer can help business owners draft agreements that protect their interests.