Protect Yourself with Noncompete Agreements

Protect company knowledge and prevent future litigation

Company secrets and valuable business knowledge can be protected by noncompete agreements between employers and their employees. These contracts or clauses are legal agreements that dictate what company information can and can't be used by current or former employees. Non-compete agreements are more necessary today than ever because of advancing technology. Client information, company-specific software and intellectual property available to employees need the protection afforded by successful noncompete agreements. The trick is creating an agreement that is enforceable. An enforceable agreement contains the following characteristics:

1. The agreement has reasonable terms for both the employer and employee
2. It contains precise wording that specifies what exactly is protected
3. It is signed by all applicable employees, preferably upon hiring
4. It pays attention to specific state guidelines as to what can and cannot be protected

Make sure you have a concrete, legal agreement to present to employees that will guard your company's valuable information.

Choose an applicable type of agreement

There are four basic types of noncompete agreements. The classic noncompetition agreement forbids an employee from working for a competitor or directly competing against the employer after termination. Nonsolicitation agreements prevent employees from otherwise soliciting the employer's clients. Nondisclosure and confidentiality agreements deal more with intellectual property and promise that information learned will remain secret. Confidentiality refers to the employer's discretion as well.

Be specific about what is protected

Noncompete agreements protect trade secrets; for example, information that is not general knowledge or is specific to your company. Broad statements about "company information" do not hold up well in court. Specific examples of hardware, client lists or blueprints make an agreement that is easier to protect.

Consider duration and penalties

Thou shalt never compete until the end of time is an unreasonable noncompete agreement. Enforceable noncompete agreements usually cover one to three years after the term of employment. A successful agreement is reasonable in duration and scope, and is beneficial to both employee and employer.

Make sure applicable parties sign the agreement

Not all employees need to sign a noncompete agreement. Mailroom clerks with no access to valuable information do not need to sign an agreement. If the head of IT (or other employees with access to trade secrets) does not sign an agreement, however, you can take no action against them if they use your company's knowledge against you in the future.

• Though noncompete agreements were initially popular with mostly high-tech companies, today they are relevant in numerous industries.
• A noncompete agreement does not uniquely consider employees. A successful agreement protects employers and employees alike, preventing damaging lawsuits.
• A good relationship with your employees goes far toward building trust, which is the best way to ensure the success of your agreement.
• Have a lawyer draft the agreement, or at least look it over. Noncompete agreements can be unpopular with certain state courts and difficult to enforce.

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