Depending on your business, your competition, and the people you hire, you may need to protect your company by drafting and enforcing non-compete agreements. These covenants not to compete can minimize the risk that an employee or another party will take sensitive or confidential information to others without permission.
Considering how powerful these agreements can be, employers must be sure that they are properly negotiated, drafted, and implemented. If this does not happen, a non-compete agreement could be unenforceable. Three especially problematic elements to avoid in non-competes include:
- Overly broad restrictions – Restrictive covenants like a non-compete agreement intentionally limit employees. But if they are too restrictive or vague, a court may not enforce them. Employers should therefore, be deliberate when assigning limits like where and when a person may not work after leaving the company. If such restrictions prevent a person from finding employment or if they are too broad in their scope (geographic, temporal, or substantive), the agreement may not be enforceable.
- No legitimate interest to protect – Unless there are legitimate reasons why a person should sign a non-compete, it may not be wise to use one. That said, if an employee has access to confidential information, trade secrets, or other information that you do not want to make available to a competitor, having him or her sign a non-compete could be wise.
- Improper drafting or signing – A non-compete agreement is a legal document. As such, you should ensure it is drafted and signed properly. To avoid the risk of the courts invalidating a non-compete, put it in writing and make sure both parties sign it. There should be no indications of threats or coercion, and it can be helpful to have an attorney familiar with state laws draft the document to ensure it meets legal standards, including the potential need for additional consideration if entering into a non-compete with a current (rather than potential) employee.
Believing your business is protected by a non-compete agreement only to find out it is not can be a costly lesson to learn. As such, you should not undermine the importance of properly drafting, signing, and enforcing any agreements you may have.