SCORE Small Business Blog

Employee Non-Compete Agreements

What if one of your employees quits, steals your customers and opens shop across town? It’s every business owner’s worst nightmare.

One way to protect yourself is to have new employees sign non-compete agreements. But to be enforceable, such agreements must balance the potential for unfair competition against an individual’s right to earn a living. That means they must be reasonable in scope and duration.

Let’s say you own an employment agency and serve a tri-state area. In that case it would unfair to prohibit someone from ever opening an employment agency anywhere in the United States – the geographic scope is too broad and the duration infinite. What’s fair and reasonable can vary from state to state, therefore check with your lawyer before adopting any non-compete agreement.

What if you have existing employees that you want to sign up? Some states require additional consideration beyond the promise of letting them keep their current jobs. Again, please check with your lawyer.

In California non-compete agreements are unenforceable as a matter of public policy. If you operate there your best bet is to use confidentiality agreements instead.

Go here for more information about legal literacy.

-Hanna Hasl-Kelchner, Guest Blogger
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