Employment law contains rules specific to each state, but it comprises of federal rules as well. It also addresses several different employment issues. Just two of these issues are wrongful termination and workplace safety.
The workplace needs several rules and laws that protect employee rights, but they also must defend the interests of employers. For example, each individual state government and the federal government have laws that safeguard employers from the bad behavior that some employees may inflict upon a company.
Employment law also includes the non-compete agreement that also goes by the names of “non-compete covenants” and “restrictive covenants.” It is highly important that these agreements are a part of employment law because if employers do not draw up these agreements very carefully, they could be taking serious risks.
You can place a non-compete agreement in your employees’ contracts when you first hire them, but you aren’t required to do so. You can also create separate agreements that you present to your employees at a later date.
Why Do You Need a Non-Compete Agreement?
In the past 20 years, the non-compete agreement has become increasingly popular, and one-fifth of the working population has signed one. The non-compete agreement prevents your former employees from working for your competitors until after several months or even years have passed. The agreement will specify the location in which your employees may not work during the agreed upon time period.
Nearly 40 percent of the working population has signed a non-compete agreement during their working years.
Why do a growing number of companies require that their employees sign non-compete agreements?
These companies have trade secrets that they do not want their competitors to know. They also would like to prevent their former employees from taking their clients to other firms. For example, food establishments like to keep the ingredients in their recipes a secret so that their food cannot be recreated anywhere else. Also, another company might have chemical formulas that it needs to keep from the eyes of other people. Non-compete agreements ensure that employees will not take the secrets they learn from their employers and start another company using those secrets.
The Composition of the Non-Compete Agreement
Non-compete agreements cannot be 100 percent restrictive. That’s because courts tend not to enforce this type of agreement because the justice system wants to encourage employers to develop non-compete agreements that are “reasonable.” An example of a reasonable non-compete agreement is one that contains requirements that can be justified. The justice system doesn’t want non-compete agreements to make employees feel coerced to remain with a company. They can, however, protect information that is unknown to others so that it can be used for the benefit of the employer. Highly restrictive agreements can also cause potential employees to decline to work for a company.
You must also be reasonable about the length of time that you need your non-compete agreement to be in force because courts will decline to enforce an agreement that has to be active for at least 10 or more years. A good length of time appears to be three or four years because judges will examine these agreements more extensively before making a decision to dismiss the contract or enforce it, but it will depend on the industry and the job’s responsibilities.
Non-compete agreements cannot pertain to the entire country as a whole; you are only allowed to specify a particular geographic region in the agreement. The geographic region must only include areas in which you normally conduct your business. For example, if you have a newspaper in Albany and your former employee opens a newspaper in Albany, he or she would be breaking the non-compete agreement. The same thing would occur if the employee goes to work for another newspaper in Troy because this city is very close to where your company is located. It wouldn’t prevent the employee from working for a newspaper in Dallas or Chattanooga.
If you are going to ask your employees to sign a non-compete agreement, the courts are going to expect you to compensate him or her for doing so. Offering a job candidate a position at your company would qualify as compensation for signing the non-compete agreement. If you find that you need to require your current employee to sign a non-compete agreement, you must offer the employee a raise in salary. You could also offer him or her benefits that he or she does not currently have. This prevents employers from engaging in deceptive practices to get someone to sign a non-compete agreement without offering the candidate a job or presenting an existing employee with a reward for signing the contract.
State Laws on Non-Compete Agreements
The federal government’s laws do not particularly pertain to non-compete agreements. Therefore, the state courts are going to be the ones to enforce the state’s laws. Each state had the right to create its own limitations where non-compete agreements are concerned. In Florida, it is highly likely that your non-compete agreement will be enforced, but judges in Montana and North Dakota do not usually make this decision. Similarly, New York will be more favorable to an employer than the judges in Oklahoma or California. When these judges do enforce restrictive covenants, they do so because a former employee had confidential data in his or her possession.
In conclusion, non-compete agreements were designed to protect businesses with loyal customers and valuable trade secrets from losing them to their competitors. If the agreements were put in place for legitimate reasons, they will be enforced; reasonable restrictions will be put in place as well.
If you are going to have your employees sign non-compete agreements, you must be prepared to offer them some type of compensation. Unfortunately, some employers believe that it is impossible for them to comply with these rules and create a non-compete agreement that adequately protects their interests. However, employment attorneys exist to make it possible for companies to follow the laws and create agreements for specific industries and jobs that serve the employers’ purposes.