In integrative negotiation, each party seeks to create and claim value while keeping the future of the negotiating relationship in mind. A non-compete agreement is one way to secure this relationship. Employers may ask potential employees to agree not to work for competitors in the future, but such requests are not always negotiable.
What is a non-compete agreement?
A non-compete agreement is a clause in which one party, usually an employee, enters into a contract agreeing not to start or join a similar profession or trade in competition with another party, usually the employer. Employees are also prohibited from disclosing operations and transaction secrets or exploiting confidential information to gain a competitive advantage under such agreements.
Aside from informing your employees, it is also a good idea to inform your competitors so they are not tempted to poach your employees. A company that hires an employee from a competitor with a non-compete agreement may face a lawsuit for violating the non-compete agreement.
How does a non-compete agreement work?
Non-compete agreements are typically signed at the start of a business relationship between two parties, typically between an employer and an employee. This contract is used to protect the employer from specific actions taken by the employee after separation from the company, assuming that the former employee will work for a competitor or start a business that will compete with the company.
Non-compete clauses state that the former employee will not work for any competitor upon termination or resignation. Employees are also forbidden from working for a competitor, regardless of whether the new job requires the disclosure of trade secrets or other important company information.
Non-compete agreements may specify the length of time the former employee is bound by the contract and the geographical region where they can work or practice.
Why your business needs a non-compete agreement?
Here are some of the reasons why your company needs a non-compete agreement:
Businesses who are always doing what they think they need to do in order to stay competitive can find themselves overlooking ethical practices. Non-compete agreements help business owners protect themselves from unethical competition from former owners, investors, or employees. This safeguard enables an employer to run their business without fear of their business knowledge and advantages being used against them.
Protecting confidential information
Companies typically invest significant resources in employee training to maximize their productivity. This training provides employees with the critical information necessary for the company’s operations and its position in the industry.
Maintaining confidentiality through the use of a non-disclosure agreement may not be sufficient. As a result, using a non-compete agreement that prohibits employees with access to privileged information from disclosing confidential business information or working for a competitor after they leave is an excellent way to help protect such information.
Protect a Company From Potential Litigation
Lawsuits are, without a doubt, pricey. While there are no contracts that can minimize litigation costs, you do have the option to protect your company’s interests through legal action and limit the damage. Non-compete agreements allow you to reach an agreement with your employees that will be beneficial if litigation is required.
So, should you litigate or negotiate?
Companies must carefully weigh the benefits of negotiating non-compete agreements with former employees versus litigating enforceability. If you have any questions about non-compete agreements or any other business-related questions, please get in touch with the Saltielt Law Group today.