Noncompete agreements are contracts between employers and employees that restrict employees from engaging in competitive activities after leaving their current position. These agreements can protect a company’s business interests. They often help safeguard trade secrets, customer relationships and proprietary information.
However, companies need to understand the proper uses of such an agreement to get the most from it.
Protect information
A noncompete agreement can protect a company’s confidential information. It works to prevent employees from working for a competitor for a certain period of time after leaving the company. Putting this restriction in place helps to minimize former employees going to work for competitors and sharing details about their former employer that the competing company could use.
Protect investment
Another use is to protect a company’s investment in its employees. Employers often invest time and resources in training and developing their employees. A noncompete agreement can help ensure that employees do not take advantage of this investment by leaving the company and immediately working for a competitor.
Protect customer relationships
An agreement can also protect a company’s customer relationships. It prevents an employee from leaving the company and then soliciting that company’s clients for business. This could confuse customers and reflect badly on the company despite the severed relationship with the former employee.
Regardless of the use, noncompete agreements must be reasonable in scope, duration and geographic area. Employers should carefully consider the specific circumstances of their business and the position in question when determining if there should be an agreement in place.