It is common for employers to utilize non-competition agreements. These contracts are often signed during onboarding as part of the employee handbook and general orientation process. Employers use them for a variety of reasons, particularly for the protection of trade secrets or the reputation of the company. However, courts often disapprove of these contracts because they can limit the employees’ right to work or earn a wage.
Requirements of a non-compete
Non-competes are more successful when they focus on legitimate business interests. Examples of this include:
- Trade secrets
- The ongoing relationships between employees and customers or clients
- Valuable business information not considered a trade secret
- Any specialized or extraordinary training
Reasonableness is essential
Courts often try to balance the company’s legitimate business interests and the employee’s right to work, so a reasonable duration, scope and geography often strengthen the agreement. Each company’s nature is different, depending on the products and services provided, which means some companies will have better luck enforcing the contract.
Companies should also be aware that once essential information may eventually become less crucial as time passes and the company and industry move forward. The company should not expect to enforce the agreement if it does not do business in the region.
The rules can change
This area of law evolves as businesses transform to meet the needs of their customers better. Nonetheless, attorneys can often provide valuable insight into emerging trends and how enforceable a contract actually is. Employers or employees with questions can get answers to their questions by speaking to a knowledgeable business and employment law attorney with experience in handling non-competition agreements.
