11 / 03 / 2015

Why You Need a Noncompete Agreement for Your Employees

A noncompete agreement is becoming more and more common as a means to protect a business's technologies, processes, trade secrets, and key information.

Employers are more likely to ask employees to sign noncompete agreements in fields which are highly competitive. There is a risk that employees may leave the company to work for a competitor, or to become self-employed in the same area using the skills and knowledge they gained during their time with the business.

What does a Noncompete Agreement Cover?

The noncompete clause may be part of a bigger agreement, or a separate document. Whichever form it comes in, it will typically cover three main areas:

  • The scope of roles the employee cannot take at a competitor
  • Geographic details on where you may and may not work
  • Information on the clause's length (generally, this period is one year, though it may be longer)

What are the benefits of signing a noncompete agreement?

For employers, a noncompete agreement protects against losing business to competitors through unauthorized sharing of information, trade secrets, and more. If an employee leaves the company and moves to a rival business, the consequences of their revealing close-held secrets may have a serious impact on daily operations, leaving companies of all sizes at a financial disadvantage.

For employees, a noncompete agreement offers a symbol of trust from the employers, and if this coincides with greater responsibility and access to sensitive data, it likely means an increase in pay. Signing a noncompete agreement may also provide more power to negotiate certain changes to the employee's position or salary, as they are agreeing to show commitment and loyalty by limiting their own options.

What do you need to Know Before Introducing them?

A business offering an innovative or high-value product or service is more likely to need a noncompete agreement, as they will have more to lose through key revelations. Trade secrets should remain known to only those on a need-to-know basis, but if they are passed on to a competitor by a former employee, there may be grounds for legal action.

If you are setting up a business, or want to introduce noncompete agreements into your existing enterprise, familiarizing yourself with the specifics of what can and cannot be included is vital.

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