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Will a non-compete agreement actually stand?

On Behalf of | Jan 3, 2023 | Business Law

As a company owner, you know that your business could suffer financial harm if your employees leave to join the competition. It could also be detrimental to you if they leave in order to start their own businesses, which then compete against you directly. Essentially, you don’t want your business to become a way to train your own competition.

One thing that people will do to keep this from happening is to use a noncompete agreement. This agreement can spell out what qualifies as competition and stipulate that an employee who leaves your business is not allowed to work there. If they take a job with the competition, then you can take legal action to prevent them from getting the job or to seek damages.

But just creating and signing this agreement is one thing. It’s quite another to have it stand in court. What are some things that could mean it doesn’t?

No geographical restrictions

For one thing, the geography matters, and a noncompete agreement has to focus on a certain area. If the agreement essentially says that a person can never work in that industry again, anywhere in the world, there is no way that a court is going to allow it to stand.

No stated duration

Likewise, it is unfair to employees when noncompete agreements last forever. This is why the duration has to be defined. Maybe the employee can’t work for the competition for the next year, for example. It would be too prohibitive to someone’s career to allow these to last perpetually.

Confusion over scope

Additionally, the scope of that person’s job needs to be defined so they know exactly what they are or are not supposed to do. Without this definition, a broad interpretation could keep someone from taking many jobs that would not be detrimental to your company at all.

Setting it up

As you can see, a noncompete agreement can be useful for your business, and it can certainly help to make it more successful. However, it is very crucial that you set it up properly from the beginning so that it will actually be useful. Make sure you know what steps to take.