In today’s competitive marketplace, it has become commonplace to have new employees sign a noncompete agreement before coming aboard. In the event of an employee’s departure and possibly being hired away by a competitor, how enforceable is that noncompete agreement?
Including several key components in this part of the employment contract can make the noncompete agreements effective and enforceable.
What should be included?
The most effective and fair noncompete agreements will be reasonable and limited in scope.
- Duration — The amount of time that the noncompete is in effect should be reasonable. For example, you may want to state that the employee may not work in such and such industry for a certain number of months after leaving your employment.
- Geographic limits — Limiting the locale involved such as the same state of area of the country could be considered fair in a noncompete agreement. But saying that the employee cannot work in the industry anywhere in the world might be considered unreasonable.
- Scope of intellectual property and business knowledge in question — Anyone learns skills in any job which may be transferable such as learning how to use Microsoft Word or Excel spreadsheets. This type of thing would not be industry-specific and would not hurt your business if the person used those skills elsewhere. However, someone stealing designs for how a specific product or process works could be considered intellectual property and, therefore, subject to enforcement in the agreement.
Keep your main goals in mind
The agreement needs to accomplish two things:
- Allow the former employee to still earn a living.
- Protect trade secrets and intellectual property owned by the business so it can continue to function and prosper.
Having an experienced business law attorney review employment contracts is not only a good idea, but it is critical to ensure something does not get missed. The attorney can see if anything important was left out and check the wording for comprehensiveness, reasonableness and enforceability.