Dinn, Hochman & Potter, LLC

A noncompete agreement must have a legitimate purpose

One of the most important things you can do as a business owner to protect your interests is have high-value employees sign noncompete agreements. The intent of having an employee commit to a noncompete agreement is to keep him or her from going to work for a direct competitor for a specific period of time after leaving your company. But when crafting such an agreement, you need to make sure that it is legally enforceable.

The first thing you need to consider is if your business actually needs to have employees sign noncompete agreements. Typically, employees who are privy to confidential business information, such as trade secrets, are candidates for these agreements. This makes sense as these employees could use their knowledge of your company to benefit a competitor and hurt your business.

But you don't want to use a noncompete agreement simply to punish an employee who wants to leave your company to work for someone else. Such punitive agreements are typically in conflict with employment law.

An enforceable agreement should have reasonable terms that outline the duration of time the agreement is in effect after the employee's employment ends. It should also specify the kinds of businesses as well as the geographic locations where the employee is prohibited from working.

Additionally, noncompete agreements should provide incentives for the employees. For example, a pay raise or promotion could be given to an employee who signs the agreement.

Regarding noncompete agreements, there are three situations in which you could really use the knowledge of a business litigation attorney. The first situation is when you are creating your agreement, and the attorney can help make sure that its terms are enforceable.

The second instance is when you have a valid agreement that is being violated by a former employer. And finally, if another company is claiming that someone you hired is violating their noncompete agreement, the attorney could help you fight the accusation.

In any of these scenarios, the attorney could provide you with representation and guidance in an effort to produce a favorable outcome for your company.

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