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What is a non-competition agreement?

Keeping trade secrets from getting into the hands of competitors is a priority for many employers. Over the course of the last two blog posts, we have discussed some of the methods used to keep these secrets from getting out. If you recall, we discussed non-disclosure agreements. Another tool that employers can use is the non-competition agreement.

What is a non-competition agreement?

A non-competition agreement serves to keep the employee from being able to work for a competitor. This agreement must have certain elements present in order to be legally valid. Generally, the court will consider the scope and the duration of the non-competition agreement if the validity comes into question. The scope and duration, and even the geographical limitations of the agreement, can't place an undue hardship on the employee if he or she leaves the company in search of a new job.

What considerations have to be factored into the agreement?

The agreement has to be supported by an incentive for the employee, must protect a specific business interest and contain reasonable conditions. The incentive for the employee can be employment if the agreement is signed when employment is offered. If the employee is already working for the employer, a new incentive must be included. Simply saying that the employee has to sign the agreement in order to keep working for the company isn't a valid incentive. A valid incentive would be something like a promotion.

With all of the considerations that go into ensuring a non-competition agreement is legally valid, it is easy to see why a person would need to ensure that the contract is a valid one. This is true for employees and employers. If a need to question the agreement does come up, doing so in court might be necessary.

Source: FindLaw, "Non-Competition Agreements: Overview," accessed July 22, 2015

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