What are Non-Competition Agreements
Non-competition agreements, also called covenants not to compete or “non-competes,” are one of the primary matters involved in employment law disputes, leading to questions from both employers and employees alike. Do I need one? Is it enforceable? What does it mean for me?
A covenant not to compete is a contract between an employer and an employee whereby, generally, the employee agrees not to work for a competitor or become a competitor for a certain period of time after leaving the employ of the employer. A non-compete can prevent an employee from forming a competing business, working for a competitor, taking a business’ proprietary information to a competitor, and luring clients or employees away from a previous employer.
Employers may want to consider utilizing non-competes if their employees: have access to nonpublic information, such as trade secrets and client lists; provide unique services—especially those that require state licensing or certification; or develop relationships with clients, as those relationships could be used to lure clients to a competitor. Additionally, non-competes are essential in the sale and purchase of businesses, to prevent former owners from starting a new competing business, using assets of the old business.
To be enforceable, non-competes must be narrowly tailored to protect the legitimate business interests of the employer, not unreasonably restrict the employee from earning a livelihood, and reasonable from a public policy standpoint. The biggest pitfall to a non-compete is for it to be overly broad, rendering it unenforceable. Non-competes that do not specify a duration, a geographic area, or the particular activities at issue will typically be read as being unlimited in nature and unenforceable. Thus, it is critical to draw clear restrictions on each aspect of the covenant.
Since non-compete agreements must be drafted correctly to be enforceable, it’s important to consult experienced employment law attorneys. Find out more about how to protect your business with non-compete agreements and contact the employment law experts at General Counsel, PC today at 703-991-7973 or firstname.lastname@example.org.