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What possible downsides (for companies) do non-competes impose?

On Behalf of | Apr 26, 2023 | Restrictive Covenants

Having your employees sign a non-compete agreement can protect many elements of your company. It is a tool that restricts current or former employees from accepting new work that competes with your operations.

The Federal Trade Commission wants to ban non-compete agreements altogether, but the state of Pennsylvania currently allows them. These agreements or clauses can benefit companies. However, they could also pose a few risks.

Fewer talented workers

Employees in the 21st century are much more aware of their rights than those in other eras. They understand that signing a non-compete could severely restrict their ability to switch jobs or find work in their field that pays similarly.

Many talented workers of today will not accept jobs that require them to sign restrictive covenants, including non-compete agreements.

Increased litigation risks

The savvy American workforce is more likely than ever to pursue litigation in the face of perceived workplace mistreatment. If employees believe the terms of your non-compete are overly (perhaps unlawfully) restrictive, most will not hesitate to file a lawsuit.

Losing such a case will expose your company to financial hardships. Perhaps worse, it may encourage other former or current employees to fight against non-compete agreements.

What should you do?

You can still use non-compete agreements, but make sure they are fair and do not violate the rights of your personnel. Consider learning more about Pennsylvania employment regulations to ensure your contracts contain legal provisions.

Another preventive measure that helps ensure your agreements are fair and enforceable is to have legal guidance as you draft non-compete agreements for your company. That way, you can feel confident that any reasonable job seeker will have few concerns about signing on with you.