When you hire new employees, you may request that they sign a non-compete agreement. The purpose of these documents is to help protect your company.
The purpose of a non-compete agreement is to get the employee to agree that they will not leave your business and go to your direct competition and that they cannot start a business that would be a direct competitor.
While these are beneficial in many situations, non-compete agreements should have limits. If you do not limit the reach of these agreements, they may not be legally binding regarding what your employee can do after parting with your business. The purpose of non-compete agreements is to protect your business, not make things harder for a former employee.
Location-related limitations need to be valid
The non-compete agreement should only apply to a specific location or area. It makes sense that you do not want an employee to leave and start a competing business in the same city or region; however, you cannot prevent them from starting a similar business in another state. This is an example of how some non-compete agreements overreach.
Non-compete agreements should not last indefinitely
A non-compete agreement should have a set time limit. The agreement should not last forever. You can also include specific time limitations, such as the employee cannot work for the competition for one or two years after leaving your company. However, you cannot have an agreement that states the employee can never work in the industry again.
Understanding the limitations of a non-compete agreement
It is important to fully understand what a non-compete agreement can and cannot do. This is going to ensure that the proper legal steps are taken and that you do not create agreements that are not fair to your workers.