- Make sure you really need one. Noncompetition agreements can be difficult to enforce, and they can pose other problems for businesses. Think carefully about which employees actually pose a threat of future damage through competition and whether your objectives can be accomplished through other means, such as a non-solicitation or non-disclosure agreement.
- If you’re going to have a noncompetition agreement, make sure to tailor it properly. Whether a noncompetition clause is enforceable will depend heavily on the particular facts and circumstances, but a court will not hesitate to disregard a noncompetition clause it finds unreasonable. Think about the nature of the employee’s work and the duration and scope of the limitation. The narrower the restriction is on the employee, the more likely it is to be enforced.
- Offer the employee a benefit for signing the agreement. A noncompetition agreement is a legal contract. The employee is giving up rights and must receive something in return. Making a job offer contingent on signing is generally sufficient if the agreement is signed at the start of employment. If you’re asking a current employee to sign, some additional compensation—other than the promise of continued employment—should be offered.
- Remember the difference between noncompete and non-solicitation or confidentiality provisions. A non-solicitation covenant restricts an employee’s ability to solicit the customers or employees of a former employer, while a non-compete clause restricts an employee’s right to directly compete with a former employer. A confidentiality agreement prohibits an employee from disclosing confidential or proprietary information. Confidentiality and non-solicitation agreements are much more likely to be enforced because they are less likely to keep workers from earning a living.
- Stay aware of legal developments in states where you operate. Rules vary widely by state, and legislative and judicial attitudes towards noncompetition agreements are continually shifting. It’s important for any employer who uses noncompetes to know and follow the rules in the jurisdiction where it operates.
Posted by Laura Bartlow