Non-compete contracts have always been a controversial topic, but they’ve been getting a lot more attention in the last few years. In 2016 the sandwich chain Jimmy Johns agreed to stop including non-compete contracts in its hiring documents after a slew of bad publicity — their terms had prevented low-wage workers from working within two miles and from taking a job with competitors for two years. In July President Biden signed an executive order that asks the Federal Trade Commission to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” With these actions in mind, many businesses are growing increasingly concerned. With a real need to protect confidential information, they are wondering whether non-compete contracts will be enforceable in the future at all. The best way to ensure that your contract can be upheld is to make sure that it is fair.
Despite their poor reputations, non-compete agreements can offer real benefits to a business. To ensure that yours are crafted in a way that is fair and enforceable, you need to make sure that they do not go beyond what is in the interest of protecting your business and that they do not cause undue hardship on departing employees. If a non-compete contract is too limiting or if it goes beyond the goal of preventing your workers from benefiting your competitors, there’s a good chance that it will be viewed as unenforceable.
The best non-compete contracts clearly define the limits that are being imposed on employees after they leave your company. These may include a set amount of time, a geographic region, and/or the industry within which they can work. Failing to include these specifics makes your agreement too broad. You should be mindful of your competitors and whether an employee leaving to go to them represents a real threat to the welfare of your business, or whether your terms are simply meant to punish an employee for leaving and going to your competitor. If the former then your terms will be considered reasonable, and if the latter then they are not likely to be upheld by a court.
Like all contracts, non-compete agreements need to include some type of consideration in exchange for the agreement that is being signed, so in order to be fair, a non-compete needs to provide your employee with something of value in exchange for their agreement. Though for a new employee the value lies in the job itself, if you are asking an existing employee to sign a non-compete then they need to be provided a bonus, a raise, a promotion, or increased benefits. Our experienced law firm can ensure that your non-compete agreement is fair and enforceable. Contact us today for more information.
