Non-compete agreement can help protect your business

On Behalf of | Jun 10, 2020 | Business Law |

Building a business is no easy feat. It can take years of hard work and dedication to secure stability and grow to a point where you feel comfortable. It request a deft hand when it comes to selecting a location, securing supply chains, marketing and advertising, providing customer service, and hiring talent. As challenging as that can be, merely establishing your business doesn’t mean that you can simply coast along. Instead, you have to diligently work to protect your business interests and, oftentimes, thereby protect your market share.

There are a number of ways to protect your business. You can develop and police intellectual property like trademarks, copyrights, patents, and trade dress, and you can develop employment contracts that ensure you receive the type of work you expect from your employees. When it comes to top talent, though, you might want to be extra cautious to ensure that their departure doesn’t derail your business advantages. This is because these individuals are typically privy to your business operations and have a skill set that can put their employer ahead of the game. Their departure, therefore, can mean that your competitor may gain the upper hand on you, especially if they hire on your former employer.

This is where a non-compete agreement may prove beneficial. These agreements, which can be found in employment contracts, restricting an individual’s employment after leaving your business. It many instances, individuals are disallowed from directing from direct competitors, which provides the greatest protection. In order to be legally enforceable, though, the agreement must be reasonable in scope, meaning that it cannot be too restrictive. Therefore, you need to carefully tailor the geographic scope of the restrictions, as well as the length during which the restrictions will be in place. It’s really a balancing act in making the agreement as broad as possible to provide your business with as much protection as possible while at the same time being narrowly tailored enough to pass judicial scrutiny.

Another thing to think about when it comes to non-compete agreements is times. If you utilize a non-compete agreement upon hiring an employee, then you’re probably fine. However, you might run into enforceability issues if you try to make continued employment contingent on the signing of a non-compete agreement. Instead, in order to legally hold a current employee to a new non-compete agreement you’ll need to offer some sort of consideration. This may be a promotion, a raise, or a bonus.

While securing a non-compete agreement can decrease the risk your business faces, it is only as strong as it is policed. Those who fail to keep tabs on former employees who are subject to non-compete agreements can find their competitors getting ahead without knowing why. So, once an employee who is subject to a non-compete agreement leaves your employ, you should try to watch your competitors closely so that you can take legal action if there has been a breach of the non-compete.