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Can any employee be required to sign a non-compete agreement?

On Behalf of | Jan 25, 2022 | Employment Law |

As a business owner who is expanding your workforce to meet demand, you want to have the new workers sign non-compete agreements when they come on. After you have invested time, effort, and capitol in training your workforce, you’re looking to protect your company by preventing them from going to one of your competitors or starting competing businesses that could negatively impact your own revenue.

But can you ask any type of employee to sign this agreement? Can you just make it part of the job? Or are such agreements only usable in some situations?

The main key for the court, when deciding whether it will enforce a non-compete agreement, is considering whether or not the agreement is reasonable. This is why there are often time limits so that you can’t set up a non-compete agreement for the rest of someone’s life. There also may need to be geographical limitations so that you can’t stop someone from starting a similar business in a location that is nowhere near yours.

This reasonableness can also apply to the line of work the employee is in. After all, “courts generally disapprove of non-competition agreements as limitations on a former employee’s right to earn a living.” What the court wants to see is an agreement that actually protects your business, your trade secrets or other forms of intellectual property.

For instance, if you run a software company and one of your head developers wants to leave and create a competing software to sell to your customers, the court will probably enforce your agreement. The developer likely learned inside information and is now attempting to take it in a way that will harm your business.

If you run a restaurant, however, and one of your waiters or waitresses wants to go work at another restaurant, even if it’s a competing business, your non-compete agreement is less likely to hold up. That person has a right to make a living and to change jobs, and you can’t infringe upon that. It’s not directly hurting your business to lose that employee, who can be replaced by someone else, and you probably haven’t lost any trade secrets or anything else of additional value that would warrant enforcement of the non-compete.

Whether you’re thinking about creating these agreements or trying to enforce them, it’s very important to understand all of the legal steps to take.