Employers may view a non-compete agreement as an essential part of employment contracts. This agreement ensures that an employee will not work for a competitor after leaving the company for a certain period.
Many business owners consider this important because it does not only discourage employees to leave their job (because they will not be able to transfer to a company with a similar business), it will also protect trade secrets and sensitive business information from being used by the employee when he/she leaves.
Information such as client profiles, contact information, and the likes, are very valuable to a business. Non-compete agreements make sure that an employee that leaves the company will not be able to use it for personal gain.
Here are a few examples of trade secrets that a non-compete agreements protect:
• Secret recipes
• Business methods
• Manufacturing techniques
• Computer algorithms
• An invention with patent pending
• Marketing methods
A non-compete agreement, however, must be well drafted in order to pass the scrutiny of the legal system. A business must have a good reason for including non-compete agreements in the employment contract. It should be included not just so that you can have a good reason to antagonize employees that leave the company.
A compelling reason would be to protect inside information that has been the key to your success in your line of business, something you have worked hard to build and develop.
A non-compete agreement must also be deemed reasonable in that it does not bind the employee to the agreement too long, or be effective over a wide geographic, or restrict the employee from too many types of businesses.
Anything that may be construed as unreasonable will be under intense scrutiny in case of a lawsuit.
For business-owners, it is essential to think about whether a non-compete agreement is worth the effort. Are there plans to put a lot of money into training en employee? Would that employee be given access to sensitive information that would be harmful to your business if it fell into the hands of your business competitors?
For employees, on the other hand, if your employer asks you to sign a non-compete agreement, do not forget to read the fine print before you sign, and do not be afraid to renegotiate the contract. Oftentimes, a non-compete agreement clause may be included in a new contract when you get a promotion or a transfer to a different position. It is not considered too forward to ask for some compensation to make up for the necessity of agreeing to a non-compete clause.
You may also demand for the non-compete agreement clause to be effective only if you voluntarily resign instead of when you are terminated or laid off. You may also ask your employer to be clear with the terms of the agreement such as how long it will be effective, the scope of the agreement and the likes.
Some businesses have specific companies that they would like to include in the companies where you cannot apply after leaving them. Ask them to be as specific as possible so that you will fully understand what you are getting into.
Exceptions
Non-compete clauses are not enforceable in some states, including California, except in some very limited circumstances:
• In instances where there is a dissolution of a partnership
• In instances where there is a dissolution of limited liability companies
• When a business owner is selling the goodwill in the business
The state of California, however, does allow nondisclosure and no solicitation agreements to protect businesses. A nondisclosure agreement, or a confidentiality agreement, is a contract that protects the information handled or revealed during a business meeting or a term of employment. Solicitation, on the other hand, implies that a person has been paid to do something damaging or illegal. The state law in California prohibiting non-compete clauses applies also to people who are from outside California but seek employment there.
To handle issues regarding non-compete agreement clauses, contact an attorney and get some qualified legal advice.
Our skilled Los Angeles corporate and business attorneys can help you draft and prepare documents such as non-compete agreements. For consultation, visit our website at http://www.mesrianilaw.com/Los-Angeles-Corporate-Business-Lawyers.html and avail of our free case analysis.
Pao is an aspiring writer who writes technical as well as literary articles, among others. She is passionate about animal rights, photography, and literature. She hopes to someday be able to share her ideals to more people through her writings.
