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What is a noncompete agreement?

On Behalf of | Feb 18, 2020 | small business law | 0 comments

If you are a small business owner or looking to work for one, you may be interested in the subject of noncompete agreements. A noncompete agreement is a clause as a condition of employment that does not take effect until after the employment agreement between employee and employer has concluded. According to Findlaw, sometimes these agreements become the subject of legal disputes depending on what they stipulate.

Essentially, a noncompete agreement will put some level of limitation on the employee’s ability to work after the employment period with the company is over. There are many reasons why a company might choose to use a noncompete agreement: generally to protect trade secrets or to prevent a former-employee from poaching clients.

If the employee signs the noncompete agreement as a condition of initial employment, then the offer of employment is considered ample restitution for signing the document. However, if you are aa business owner who wants current employees to sign a noncompete agreement, you have to offer something like a promotion in exchange for the agreement.

Noncompete agreements can become contentious in court if what they stipulate puts too much of an onus on the employee’s right to make a living after ceasing to be employed by the company in question. The noncompete agreement must be seen as “reasonable” by the courts, and this often depends on the actual content of the agreement. For instance, limiting a former employee from competing within the local geographic area would be considered reasonable, but a noncompete agreement cannot extend into geographic territory where the business has no presence.

FindLaw Network.