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Business owners: Be sure your non-compete agreements are valid

One of the many tools that business owners may use to protect themselves from legal disputes is a non-compete agreement. These agreements allow an employer to restrict employees from leaving their company to work for a competitor.

There are numerous benefits to having a non-compete, including the retention of talent and the protection of trade secrets. However, in order for these agreements to be effective, they must be valid.

When you should have a non-compete agreement in place

Backing up a little, we should explain that a non-compete agreement is not necessary for all people in all situations. In most cases, they are best suited for employees who are in powerful, high-paying or high-skill positions.

That being said, statistics show that roughly 20 percent of 11,505 workers surveyed were party to non-compete agreements in 2014. In other words, many employees are bound by these agreements, so it is crucial that they are valid.

What makes a non-compete agreement invalid?

In order for your agreement to be enforceable, it must stand up to legal challenges.  As discussed in this LinkedIn article on non-competes, the following elements could make your non-compete invalid.

  • It is overly restrictive or unreasonable with regard to the time limits during which an employee is prevented from working in a competitive capacity
  • It places unreasonable and overreaching geographic restrictions on the employee
  • It includes blanket provisions that prevent a person from earning a living
  • It does not protect a legitimate business interest

Under these circumstances, the courts could deem a non-compete invalid. 

Ensuring your non-compete agreements stand up in court

If you wish to create and have employees sign a non-compete agreement, you would be wise to take steps to ensure you have a valid document. If you do not, you could wind up losing talent, information and customers to a competitor.

One way to protect your business is to consult an attorney when creating or attempting to enforce these agreements. With legal guidance and advice, you can be confident that you are properly utilizing the tools available to you.

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