What is a non-compete agreement? Learn more about this critical legal document in this article.
Companies, whether big or small, do all that is legally possible to ensure they are on the safe side of their business operations. This is why many companies require employees to sign contracts like a non-compete agreement before they allow them to begin working for the business.
So, what is a non-compete agreement? What does it mean for the parties involved? Why is it important? And where is it enforceable? Read on to find out.
What is a Non-Compete Agreement?
A non-compete agreement, otherwise known as a “covenant not to compete,” is a legal agreement or contract that employees may be asked to sign before they start working for a company.
This contract prohibits employees from competing with their employers until after their employment period is over. While the contents of a non-compete agreement may vary from one company to another, here are some common things an employee may be prohibited from doing by their employer when they sign a “covenant not to compete” agreement:
- Starting a business that offers the same products or services as their employer
- Leaving to go work for their employer’s competitor
- Recruiting former workmates to work for their company
What are the common contents in a Non-Compete Agreement?
As we’ve just explained, the contents of a non-compete agreement may vary from one company to another. However, some of the common contents that may be found in most non-compete agreements include:
The Duration
Most “covenant not to compete” contracts specify the duration in which the contract is enforceable. It could be six months, a year, or even longer. However, long-term non-compete agreements aren’t recommended because they may be more difficult to enforce.
Geographical Area
Another standard piece of information on non-compete agreements is the geographical location limit. The employee may be prohibited from seeking employment from companies within a specific area if their job with the current company is terminated.
Competitors
Non-compete agreements may state which kind of businesses an employee shouldn’t work with if their employment period with their current employer is over.
Damages
Almost all “covenant not to compete” contracts specify the damages the employee will incur if they breach the agreement.
Why are Non-Compete Agreements important?
Many companies use a “covenant not to compete” contract to legally protect confidential information like trade secrets, processes used to produce their products, and proprietary information, to name a few examples.
If they don’t use this contract, some employees may use the above information to help a competitor, and the company wouldn’t be able to do anything about it.
Where are Non-Compete Agreements enforceable?
In some countries like the United States, this contract isn’t enforceable in every state.
States do not allow employers to ask employees to sign this agreement. Other states take it a step further by suing employers who require employees to sign this contract.
In Florida, however, a non-compete agreement may be enforceable if it is reasonable in regard to duration and geographical region and protects a legitimate business interest as laid out in the Florida Statutes.
Wrapping Up
Non-compete agreements protect companies from employees who may betray them to their competitors or even become competitors themselves.
However, these contracts need to be reasonable in terms of the geographical location limit and the duration of the agreement, among other factors, to make them enforceable.
Need help with an issue pertaining to a non-compete agreement? Get in touch with the Saltiel Law Group today to set up a consultation.