A non-compete agreement is an official contract signed between the business and employee at the time of offering an employment which agrees not to compete with the present employer during and after the employment tenure. This agreement denotes that the employee is restricted to work with any other company or competitors of the particular business. This kind of agreement is presented by a business with an intention to maintain confidentiality at its best. Moreover, the confidentiality regarding the trade secrets could also be maintained potentially by the help of this contract.
In a condition where employee turnover is extremely high these days and company’s loyalty is also diminishing, a well formulated non-compete agreement could help the business authority to maintain confidentiality policies and can address the risk of exposing the internal information. For constructing a well documented non-compete agreement, one has to follow certain factors as enlisted:
- The agreement should essentially define competitions. This is because the narrower it would define the term, easier would be the process to enforce the contract.
- The contract should also essentially narrate the relationship shared by the business with its respective customers. In this regard, create a non-solicitation clause that would restrict the employees to contact and solicit business from the existing base of customers.
- It is essential to limit the non-competes within the key employees. The key employees who are having significant responsibilities in the business and have constant contact with customer base are more likely to be repressed from competing. However, it is difficult to justify non-competes for lower level employee.
- It is necessary to determine the confidential information clearly before defining it in the agreement. Certain information that are truly ‘confidential” in nature has to be protected. Hence, one should ensure to include a non disclosure agreement for the purpose of preventing the employees from sharing the trade secrets and confidential information with a third party business. However, one should ensure not to be extra inclusive in defining about what is considered to be as confidential content.
- Finally, the document should also recite about the incentives that the employee should receive for accepting such a job offer by signing into the non-compete agreement. This kind of compensation can also enhance the chance of its enforceability.
Apart from considering the above mentioned factors strictly while documenting a non-compete agreement, one must also ensure to negotiate the agreement in good faith.