The reasonableness of non-compete agreements

On Behalf of | Jan 11, 2022 | Business Law |

Non-compete agreements are a fairly common way for business owners to ensure that their employees are not going to leave the company and then do something that would financially harm that company. For instance, directly working for the competition or starting a competing business from the ground up.

If you are bringing on new employees or opening a business that needs an entire staff, you may be considering using non-compete agreements to protect yourself. This can be wise, and they can be very helpful, but you need to make sure that you understand the legal obligation to make them reasonable. If you do not do this, the non-compete agreement may not hold up when you need it.

What types of factors determine reasonableness?

There are a few different things you have to consider when determining if the agreement is reasonable or not, starting with the type of employee that you have. Many lower-level employees should not be governed by non-compete agreements because it could make it impossible for them to work, and there is no real benefit to your business. An example could be a cashier or a floor worker. Non-compete agreements should be reserved for those who are high enough in the business that they have access to trade secrets that could harm your company if they got out.

Other factors that may be considered include the geographical region in which the non-compete agreement applies, the length of that agreement, and things of this nature. It is fine to protect your company, but you can’t do so in such a way that it overwhelmingly harms an employee’s ability to earn a living.

If you’re setting these up, you must do it properly, and it’s important to know exactly what steps to take.