Non-Compete Agreements for your business should be drafted by attorneys so they meet particular company needs, conform to relevant state laws, and are deemed enforceable.

Under a Non-Compete Agreement, an employee agrees not to compete with the employer after employment ends. Confidentiality covenants are generally also included in such agreements. In enforcing such agreements, courts must balance the need to protect its interests with the employee’s need to make a living. Therefore, the documents must be very carefully drafted to ensure enforceability.

There are a few issues to consider when implementing non-compete agreements

Competition

Competition must be carefully defined. In general, the more narrowly this term is defined the more likely it will be able to be enforced. If you define competition as companies in any field related to your industry, you will be too broad in your definition and have difficulty enforcing after an employment split.

Customers

Customers or a specific type of customer must be clearly defined if customer relationships are to be protected.

Goodwill

The good relationship an employee or company has with a customer is an asset that belongs to the company. However, courts closely examine the nature of the employee’s responsibilities and relationship with customers to determine whether goodwill is threatened.

Limit Your Non-Compete Agreement to Key Employees

Key employees with significant responsibilities and/or regular customer contacts are more likely to be restrained from competing. Non-competes for lower level employees are hard to justify.

Confidential Information Must Be Clearly Defined and Identified

The only information that may be protected is confidential information. Courts consider the importance of the information to the business, if the information is otherwise available to third parties, and what restrictions were implemented to prevent its disclosure. Be careful not to be over-inclusive in your definitions of what you consider to be confidential.

Start from the Beginning

Non-compete agreements must be supported by consideration. In other words, employers must give something to the employee in exchange for his/her promise not to compete. Hiring an applicant generally, provides the necessary condition.

After employment has begun, additional consideration may be required, such as a signing bonus, a promotion, or a pay increase. However, such agreements are stronger and more easily enforced if signed at the start of employment.

Agreements

Agreements must be negotiated in good faith and be restricted in time and location. These concerns are particularly important in today’s high-tech environment where information becomes obsolete quickly and markets change daily. In some industries, one year can equate to several generations or an eternity.

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So, if you landed a major gig only for your prospective employer to give you a non-compete agreement, don’t worry. This article details the nooks and crooks you should know before coloring the dotted lines.

What is a Non-Compete Agreement?

A non-compete agreement is a document that legally binds two parties. It restricts the employee from starting a competitive business for a designated amount of time. The agreement burns you from exploring new opportunities in rival companies. Also, you cannot disclose information considered by your employer confidential or proprietary.

For clarity, just know that this legal binding is meant to protect the working condition and wages of the US workforce while at the same time allowing the hiring of foreign employees. So, whether to sign it or walk away is determined by how bad you need that job.

How Important Is It?

The law obliges every potential employer to confirm the authorization of their new employees for work but not to discriminate against hiring foreign employees. It is an essential document this.

The non-compete agreement started as a scalpel for industries to protect their intellectual properties. With time technology has made this need a desperate must-have bludgeon that exploits every sector in the US. With the uncertainties and unpredictability of the future, companies have to retain their most valuable capital – their talented employees.

When no is not a luxury you can afford, try to bargain for better terms. Read every line. Scrutinize every detail. Make sure you get it right before signing. The non-compete law varies in every state.

Where You Should Pay Attention

The larger the regional radius that binds you, the more you should negotiate for better terms. Also, ask the hiring company to specify which companies are out of your reach so you find yourself exiled from the rest of the industry. Remember that that contract comes with an expiry date.

Keep your employer on a short leash. Limiting yourself to one place for long periods is a career killer. Again, bargain for the departure time. Does the contract hold if you are fired? Also, in case you decide to sue the employer when the contract is still valid, who pays for the company lawyer?

Hiring foreign employees gets harder every day. The non-compete agreements are the latest forms of economic insurance.

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When hiring foreign workers, you’ll need permission from government agencies and may want to have them sign a non-compete agreement. Employers have to ask for certification first from the Department of Labor. A work visa issuance is not guaranteed by approval from the Department of Labor.

Once their application is approved, the employer must require a work visa for the employee from the U.S. Citizen and Immigration Services. Job applicants must also prove under the provisions of INA that they are admissible to the U.S.

The various foreign labor certification programs have the role to ensure that hiring foreign workers in the U.S. on a temporary or permanent basis is not going to affect negatively the wages, job opportunities, and working conditions of American workers.

One of the issues you may face as an employer of foreign workers is related to the non-compete agreements. For some companies, the non-compete agreements are necessary in order to ensure that the business doesn’t lose confidential information and trade secrets to competitors.

What is a Non-Compete Agreement Exactly?
Non-compete agreements are contractual agreements signed between a client and independent contractor or an employer and employee. They have the role to limit for a duration of time the worker’s ability after leaving his or her current job to work for a competitor.

These agreements are not only to be found between American companies and foreign workers. They also can be necessary in the case of hiring American workers. However, in order to protect trade secrets, they might be even more necessary in the case of hiring foreign workers.

How Are They Enforced?
The enforceability of a non-compete agreement depends on what state it is being applied and how it is worded. In some states courts broadly enforce non-competes agreements, while others require more narrowly tailored agreements. California and several other states do not enforce non-competes agreements in most cases.

Should I Use One?
As an employer, it is not always a good idea to require your foreign worker employees to sign a non-compete agreement. Sometimes, these agreements may have the potential to scare away any good candidates for your open position since talented people may prefer to want to keep open their options.

In case that you are considering having your foreign worker employees sign a non-compete agreement, you need to be very clear on what specifically are you worried about. This way you can better tailor your agreement so that it isn’t overly broad but addresses your concerns.

A well designed non-compete agreement has greater chances that your non-compete agreement could be enforceable in most jurisdictions. Generally, such an agreement should be reasonable in duration, scope, and its geographic reach.

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The employers use this agreement to protect their trade secrets and goodwill. An employee might learn the trade secrets of an employer and then decide to start a business using the acquired trade secrets or use the acquired good will to compete with the employer. This agreement becomes active after the end of employment because this is the time the employee ceases to be the employee of the particular employer.

When Are They Used?

For a non-compete agreement to be valid it must be supported by consideration. This means that the employee must get something in return for signing the agreement. When it is signed before employment, the employer is required to provide the employee with employment that will sustain him or her without having to engage in other things. In case the agreement is signed after being employed, the employer is required to promote the employee or add something else that was not included in the original employment agreement.

Why Use One?

Another condition of this agreement is that it must protect a legitimate business interest of the employer. This means that the agreement should be legal only if when the employee starts competing with the employer or working for the competition the employer will lose something of value. The court is responsible for determining whether the employer legitimate business interests will be affected by the employer starts competing with the employer.

Does It Apply Worldwide?

The non-compete agreement should also be reasonable in scope, time and geography. Every agreement is unique depending on the services provided by the employer. The agreement should state the scope it covers and also the geographical area. If the employer provides services in a certain geographical area the agreement can bar the employee from operating within that particular area but be free to operate in other areas beyond the stated area. The time scope states the period of time when the employee should not engage in the stated business. All these factors need to be reasonable and court plays a big role in determining these factors.

The non-compete agreement can be signed by almost any employee.

Foreign Employees

While hiring foreign employees one might require that they sign this kind of agreement. This is helpful because some of the foreign employees might learn trade secrets and gain goodwill from working for a certain employer.

When hiring foreign employees especially the one with special skills one needs to decide whether to make the employees sign the agreement. Therefore, a non-compete agreement is an important instrument for protecting employers from the challenges that they might face when the employees stop working for them.

When hiring foreign employees especially the one with special skills one needs to decide whether to make the employees sign the agreement. Therefore, a non-compete agreement is an important instrument for protecting employers from the challenges that they might face when the employees stop working for them.

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A non-compete agreement stipulates that if an employee leaves their job, they cannot work for their former employer’s competition during a specified non-compete period. These agreements, which are signed upon employment, are meant to protect the interests of the employer and prevent former employees from sharing vital trade secrets and insider information.

If you are considering a job where you are required to sign a non-compete agreement, you should take careful steps to understand all of its stipulations before you sign. Understanding the agreement upfront can save you headaches later. Here are three questions to consider:

1) Is the agreement reasonable in what it asks of you? How long is the non-compete period the employer is asking you to agree to? Will you be okay not working for that length of time if you can’t find work because of the agreement? Is the agreement specific in the types of jobs that you will be unable to take, or is it general and vague? If an agreement specifies merely that you can’t do any job similar to yours with a competitor, it may overly limit your employment options. While the job probably sounds good right now, situations change and you may be looking for employment later on. Make sure that the non-compete agreement doesn’t restrict too tightly your future employment opportunities.

2) Does the agreement offer a garden-leave provision? A garden-leave provision requires your former employer to pay your salary and benefits if, because of the agreement, you are unable to find employment during the non-compete period. Non-compete agreements protect employers, but garden-leave provisions protect you. If the agreement doesn’t have one, ask if it can be added in or contact an attorney who specializes in contractual law to help you determine your options.

3) Does the non-compete agreement adhere to public policy? Each state has specific statues that govern non-compete agreements. If a non-compete agreement seems off to you, you may want to hire an attorney who specializes in contractual law to review it for you. The agreement may not actually be legally binding. In that case, you can sign the agreement knowing that it couldn’t actually be legally upheld, you could ask the employer to revise the agreement, or you could take the faulty agreement as a signal that your potential employer may not be the best one to work for. Your attorney might be able to help you decide.

In conclusion, a well-written and fair non-compete agreement takes care of both the employer and the employee. Poorly written agreements, however, tend to take advantage of the employee, limiting their future ability to gain employment in their field. If you find yourself suffering unjustly from a non-compete agreement, you should contact an employment law attorney. If they deem the agreement to be unreasonable or in violation of public policy, they can help you file declaratory judgment against your former employer that could void the agreement and allow you to begin tort proceedings to recover damages. Preventing such legal action, though, by making sure your agreement is reasonable upfront can save you uncertainty and suffering later.

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