04 / 19 / 2015

Non-Compete Law: Must-Have Elements In A Non-Compete Agreement

Do you want to maintain a competitive advantage in your industry by protecting your most valuable information? A non-compete agreement is an essential tool that protects the confidential information and trade secrets of entrepreneurs and businesses.

This article will examine three must-haves in a solid non-compete agreement. There is no one-size-fits-all template that works for all situations, but these are the terms that are absolutely necessary.

Consideration

A common mistake that businesses make is drafting a non-compete agreement that isn't enforceable because there was no consideration. The law defines a consideration as an "exchange of value," which means the party signing a non-compete should receive something in return. Usually this will consist of hiring the individual or the sharing of trade secrets.

To be enforceable, an employer must have the future employee sign a non-compete agreement before hiring them. Otherwise the condition of employment won't be a consideration, since the employee was already hired.

Reasonable Restrictions on Duration and Scope

To be enforceable, a non-compete agreement must have reasonable restrictions. What's considered "reasonable" can vary for each unique situation and the law in a given state.

An agreement within the range of reasonable is limited by:

  • Length of time
  • Geographical scope

Reasonable time frames can range from six months to two years. In the case of the sale of a business that term can be longer. The agreement should also define a specific geographic region where competition is restricted and won't be enforceable in an unreasonably large territory.

Protectable Interests

A non-compete agreement needs to identify the protectable interests, such as trade secrets, confidential information, customer relationships, etc. The following terms should be acknowledged:

  • The stated interests are vitally important to the business
  • A breach in the non-compete agreement will cause irreparable harm
  • The employer is entitled to an injunctive relief in the event of a breach of the agreement by the employee
  • The employee has returned all materials and documents containing confidential information or trade secrets

Failure to list specific protectable interests will cause your non-compete agreement to be unenforceable.

To have an agreement drafted for your business, speak to a Houston non-compete agreement attorney at Vethan Law Firm, P.C.

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