Non-compete agreements are contracts employees sign that restrict them from working for a direct competitor of your company or starting a competing business for a certain period of time after leaving your company. When properly drafted, these agreements can help protect confidential information and customer relationships.
Many employers make mistakes that could render the non-compete unenforceable.
Being too broad
One of the most common errors is making the non-compete too broad or restrictive. If the limitations on time, geography and scope of work are unreasonable, it can render the agreement unenforceable.
As a general rule, you should limit restrictions to less than two years and a reasonable geographic territory where the employee worked and had influence.
Lacking consideration
Under contract law, non-competes should include consideration. That means it should include something of value given to the employee in exchange for signing. Often, just having a job is not enough. You either need to give a promotion, raise, continued employment or access to trade secrets.
Failing to update agreements
It is important to review and update your non-compete agreements. If an employee receives a promotion to a role with expanded responsibilities, access to more confidential information or influence over different products, services or territories, the original agreement terms may no longer be reasonable or enforceable.
Have employees changing jobs or responsibilities sign an updated agreement tailored to the new position. Courts may see an outdated agreement as too restrictive for the employee’s current duties.
A 2019 survey indicates that 49.4% of businesses have non-compete agreements for at least some of their staff. Protect your company’s interests with a comprehensive and enforceable non-compete agreement.
