Non-compete agreements vary in their specific wording and intent, but the general idea is that an employee who takes a job is told that they cannot leave to join the competition or create their own competing company. This may only be for a set time, such as two years after leaving that company.
These agreements are also very common. Some reports indicate that tens of millions of U.S. workers have already signed them in one form or another. Should you have your employees do the same?
What are the benefits?
The benefits generally just protect your business. For instance, you may worry that workers have to learn company secrets to do their job. You’ve worked hard to keep those secrets from the competition, so you want to know that an employee who quits isn’t just going to give them away.
This can also help you retain workers who want to stay in that field. They know that they have to make a major change to switch roles, such as choosing a new industry or a vastly different location. Some may do that, but many will not, and they’ll be less likely to make lateral moves.
Finally, the agreement can keep workers from relying on relationships they create while at your company. For instance, if a salesperson has a contact list and knows they can move $1 million worth of product every year, they may be tempted to start their own company based on that list. This is what you want to prevent, since it directly harms your company.
What are the downsides?
The only real downside is that some employees may refuse to sign. If you’re really dependent on having top talent, you have to consider whether or not it’s worth it. An employee who won’t sign may decide to take a job with the competition, where such an agreement isn’t required. You simply have to weigh the pros and cons as you build up your own workforce.
What should you do?
If you’re thinking about non-compete agreements or any other aspects of contract law, just be sure you carefully consider all of your legal options.