Non-Compete Agreements: An Overview
Business or company owners are always interested in protecting their assets. A non-compete agreement is one of many ways in which a business owner could protect his or her assets. Non-compete agreements are used to restrict and limit company associates, employees, and even clients from candidly competing against the respective business.
The following is a limited list of examples in which a non-compete agreement can be useful for a business owner:
- In an effort to prevent an employee or business associate from utilizing or infringing on company-owned information, which could be used once they are no longer with the company.
- Individuals who have purchased a company from another party can use a non-compete agreement in an effort to prevent that selling party from starting the same competing business.
- In an effort to prevent company workers from getting hired at a competing company.
When a business owner is attempting to protect his or her business’ proprietary information as well as restrict the possibility of direct competition, non-compete agreements can help. In order to embark in the most profound and insightful non-compete agreement, interested business owners should seek the advice and support of a qualified business law attorney. An attorney with the right experience can help any business owner draft a non-compete agreement that is right for the specific business.
The Design and Implementation of A Non-Compete Agreement
Before introducing the importance of the agreement’s design, it is important to note that not every state will support a non-compete agreement. Before researching the perfect design, interested company owners should check their local state’s rules and regulations on non-compete agreements.
When a business owner has decided to use a non-compete agreement to safeguard his or her company, he or she will likely introduce the agreement to the applicable parties at the commencement of the partnership. For example, if a non-compete agreement is being introduced to an employee, the agreement will likely be introduced in the hiring process.
There is a multitude of ways in which a non-compete agreement can be customized to fit the specific needs of a company. Most agreements, however, will include the following elements:
- A specific duration for the agreement.
- This specifies how long the contract will last.
- Most agreements will generally last between six months up to several years.
- It is important to abide by the rules and regulations each state has imposed. Some states will have predetermined time limitations.
- If the agreement lasts for an overextended period of time, these agreements will generally not stand in court.
- The location for the agreement.
- If the location of the business is local, business owners will generally want to restrict employees from starting a similar business within the region.
- Very specific details.
- Generally, non-compete agreements should avoid being too vague.
- A vague, ambiguous, or broad non-compete agreement will usually have no standing in court.
- Details to include in a non-compete agreement should include a report of what work is not permissible.
Other details could include what a business owner considers to be direct competition.
Advantages and Disadvantages of Non-Compete Agreements
The main purpose of a non-compete agreement is to protect a company owner’s proprietary information; therefore, it is evident that the main advantage to having a non-compete agreement is to benefit the company and the company owner. Due to this, many states have begun to enforce strict limitations on non-compete agreements. Other states have completely banned non-compete agreements.
The following lists will highlight some of the main advantages and disadvantages to having non-compete agreements for both employers as well as for employees.
- Advantages: restricts the distribution of proprietary information and to lessen the possibility of any direct competition in the local market.
- Disadvantages: a non-compete agreement can be difficult to enforce. It can also limit a company’s retention of qualified employees.
- Advantages: certain employees may have the impression that non-compete agreements will safeguard their place of work and ultimately their job.
- Disadvantages: a non-compete agreement can limit an employee’s career growth. Non-compete agreements can also avert former workers from obtaining a job locally, which in turn can affect the community’s employment rates, among other factors.
Drafting the Correct Non-Compete Agreement With the Support of a Business Law Attorney
Undoubtedly, non-compete agreements can be quite complex. Understanding what can be valid in a court of law can be difficult and without a sound agreement, a person’s business can remain susceptible to competition. Finally, another important element to consider is that not all states will hold non-compete agreements valid; therefore, it is important to draft an agreement that will be accepted in your jurisdiction. Acquiring the support of a business law attorney can help any business owner understand the legal benefits and implications of having a non-compete agreement. A business attorney can also help a business owner draft an agreement that is suitable for his or her company’s needs.