If you have a business that has unique practices that give it an edge over competitors, you want to do everything possible to protect those valuable secrets. One tactic you may use is having your employees sign a noncompete agreement.
Noncompete agreements prevent your employees from working for a competitor, making sure your employees can’t give your competitors valuable information on your business practices. However, employees and courts have started to question the legality of noncompete agreements. While court rulings and laws have started to change the scope of noncompete agreements, you may still be able to use them for your business.
How noncompete agreements work
Noncompete agreements are usually a part of an employee contract. They have language that restricts an employee from taking a new job with a competitor. If the employee leaves the company, either by the employee’s choice or the employer’s choice, the agreement restricts the employee from working for a competitor and sharing industry secrets.
Noncompete agreements may have different terms based on each company’s needs. The agreement may prohibit an employee from taking a job in a certain industry or market. Or it might restrict the employee from taking a job within a certain geographical area. The agreement may also set a time limit for how long the employee cannot work for a competitor.
Noncompete laws vary by state
Right now, the legality of noncompete clauses depends on the state. California is the only state that has made them illegal, and an employee can sue an employer that enforces a noncompete agreement. North Dakota and Oklahoma don’t enforce noncompete agreements.
They are legal in most other states. Different states have different levels of restrictions on noncompete agreements. In general, most states that allow them expect the company to have a valid reason for including a noncompete agreement. The agreement must not be overly restrictive, often requiring a reasonable time limit for when the agreement expires. While each state is different, many courts will not enforce noncompete agreements that are too restrictive or unreasonable.
A noncompete agreement may be available for your business
Depending on the state that you have your business in, you may still be able to protect your company secrets with noncompete agreements. But you will want to make sure you get legal advice when drafting the agreement. Laws on noncompete agreements may change, so you want to make sure your agreements are enforceable.