As a small business owner, you may want to protect your business with a non-compete agreement. Essentially, you’re just trying to use this contract to protect your intellectual property. You need to train your employees and show them how to work at the business, and you want to make sure that they don’t quickly use their knowledge to start another company or join your competition.
However, a non-compete agreement does need to have some restrictions. If it does not, it is likely not going to hold up if you and a former employee ever find yourself in court. Let’s look at two of the most common restrictions and why they have to apply.
Geographical limitations
First of all, you have to restrict the agreement to a geographical area near your business. There’s no specific limit on this, but it essentially just means that you are preventing the worker from joining the competition in your area. You cannot stop them from working for any other business within the state or the country. Doing so would drastically limit their ability to pursue their career and would be seen as incredibly overbearing.
Time limitations
Next, your non-compete agreement needs to have a set time limit. Often, it will only last for a year, or maybe just for a few months. It cannot last in perpetuity. If it is an endless agreement, it would once again be too detrimental to the employee and their future. It would also be seen as unfair to restrict employee movement within the labor market by essentially tying them to your business for their entire career.
Setting up these types of agreements needs to be done correctly. All involved must know what legal options they have.
