A non-compete contract is a legal document signed by an employer and an employee whereby the employee consents not to become involved in activities that are in direct competition with the employer’s business during and for a period of time after his or her employment. In this case direct competition entails going into markets or professions that could potentially take business away from the employer’s organization.
In its most basic form, a non-compete agreement restricts employees from quitting and going to work for an organization’s competitor for a set period of time and within a certain geographical locale. The time in which a non-compete contract is effective can vary from six months to five years or more. The aim is to ensure that employers avoid investing time and resources in training and shaping employees in job-related skills, only to have them transmit those skills to a direct business competitor.
Grounds for Using Non-compete Contracts
The use of non-compete contracts should be considered under the following circumstances.
- When employers wish to protect their company’s goodwill and valuable trade secret information from use by competitors
- When employers want an effective tool for retaining talented members of their staff so that the staff members don’t move on to related jobs with competitors
- When employers wish to benefit longer from their investment in training and molding employees in valuable skills and proprietary work methods.
Enforcement of Non-Compete Contracts
If employers wish to keep their employees from competing with them in the employees’ new positions, non-compete agreements can be enforced when the association between employers and employees has ended, and the employees join other organizations. Activities by employees that may be considered competitive and enforceable through non-compete contracts can include the following:
- Working for competitors that do business in the same market
- Beginning new businesses in the same field or profession
- Enticing the previous company’s workers to leave and work with them in a new enterprise related to that of the previous employer.
However, non-compete contracts must meet certain criteria in order to be enforceable. Thus, it’s important to have legal counsel examine any non-compete contract to ensure it isn’t excessively harmful or limiting to an employee. If you’re considering using non-compete contracts in your business, get in touch with Bell & Shaw Law, LLC today for a free consultation. Our knowledgeable business attorneys can help you create a reasonable agreement that’s fair to both you and your employees.