What Is A Non Compete Agreement?
A non compete agreement is a contract between two parties (mostly between employer and employees) which they agree not to make a competition during the contract. By doing this, an employer can prevent its employees to enter the market directly to compete with them. This will also make a healthy business whether in terms of income and business environment.
Why Is A Non Compete Agreement Needed?
The agreement will be enforced when the employees are entering a new position too. In this matter, the employer is expecting not to see their staff opposes their business whether by working with another company or starting a new business in the same field. Even, independent contractors and even consultants who have terminated their contracts are not allowed to open a business in the same field due to clauses in the agreement prevent them.
Besides, the employers also can use this agreement to prevents their former employees to give information about crucial things such as clients, sensitive information such as formulas, pricing, salary, strategy, methods, future products, and ideas. This is important to keep such things confidential so the business remains safe and stable.
The Duration of A Non Compete Agreement
This crucial to mention the dates so you can know the duration of the agreement will be effective. However, it is important to seek advice about making a realistic agreement that can protect the company’s assets without limiting the former employees to join the same field.
Legal Validity Non Compete Agreement
The challenges of the non compete agreements are whether this can be legally binding or not. The case will vary from case to case which depends on the state law, region, time, and what kind of thing which employers consider as the competition.
Of course, the non compete agreement is considered binding as long as it has clear limitation and realistic regions as well as the exact amount of time.
What To Include In The Agreement?
Note that the non compete agreement should be realistic and equitable to both parties so it can be considered legally binding. Therefore, make sure you include the following things:
- State the effective date when this agreement will be effective.
- State the reason why this agreement is made.
- State the specific date in which the employees are prevented to work in a competitive sense with the location covered and also consider the local law that applies.
- List the details of how the non competing party will get the compensation for agreeing on this term.
One example, why a party needs this agreement, is one, two or three companies are in the same market competing with each other. The company might agree for the salespeople to sign the non-compete agreement to prevent them from leaking the information to the competitor so they can use this to oppose them. For example, they are not allowed to disclose a list of clients that are partnering with them. This is still considered equitable in the agreement and can bind them legally because it is realistic.