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And Now We Come to the Non-compete Agreement

Non-compete agreements are tricky. The courts don’t like to enforce them because they don’t like to keep someone from earning a living. They have to be limited in time, limited in geography and must protect a legitimate business interest. They have to be signed literally on the first day of employment, or a bonus must be given to make the agreement enforceable.

Non-compete agreements are designed to allow businesses to disclose their “secret sauce” to high-level employees without fearing the employee will open a competing business down the street. I think they are overused.

An overly broad non-compete can really hurt the business. If any employee successfully challenges the non-compete in court, all the non-competes are void. Additionally, an overly broad non-compete can generate bad feelings among employees and the public. A recent example of this is Jimmy John’s gourmet sandwich shop, which prohibited its delivery drivers from working for a competing store within 2 miles of any Jimmy John’s location for 2 years.

For most employees, a confidentiality agreement and a non-solicitation agreement provide significant protection for the business. Generally, only high-level employees like executives and managers have enough confidential information on business practices to need a non-compete.

I recommend my clients limit disclosure of the most sensitive information to key employees only. For others, we think about what we need to protect and the best way to do it. The non-compete must only stop the employee from using their job skills with another employer nearby – it cannot stop the employee from taking any job with a competitor (eg, being a janitor or receptionist).

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