Asking your employees to sign a non-compete contract is an excellent way to protect your trade secrets, confidential business information, and established relationships with your clients, but in order to be enforceable, they must be carefully crafted to ensure that their terms are reasonable and legal. Otherwise, there is a good chance that the court will not enforce its terms. Though President Biden has proposed banning or restricting the use of non-compete agreements entirely, they continue to be popular.
Because non-compete agreements are contracts, they require that consideration be provided to the employee in exchange for agreeing to its terms. When a person is newly hired the consideration provided is the job itself. But if you have an existing employee who you want to sign a non-compete in order to shore up your company’s protection, you will need to provide them with something of value in order for the terms of the agreement to be enforceable in the eyes of the courts. Though some states consider continued employment to be consideration enough, many others disagree and require additional value be provided. This might include a promotion, a more desirable shift, or additional compensation or benefits. Bonuses can also be used as an incentive for signing a non-compete.
It is always a good idea to work with an experienced business attorney when creating a non-compete contract for your organization. They will be familiar with the specific requirements of your state with reference to what types of consideration are required for existing employees, as well as any limitations or specifics in terms of length of time that an employee has been employed that may apply. They will also be able to ensure that the terms of your non-compete agreement are enforceable and not overly broad, though most states will permit the terms of non-compete agreements to be revised in order to strike unreasonable terms and leave the rest of the contract in place.
One way or another, your non-compete agreement must be narrow enough in the limitations that it imposes on employees that it clearly was created to protect legitimate interests and prevent the company from suffering damages. Overreach in this regard can work against you and can be viewed as punitive.
For assistance in creating and applying a reasonable non-compete agreement policy, contact our Philadelphia law firm today.