How to Structure a Proper Noncompete Agreement

Use a noncompete agreement carefully. They are often used improperly, which means a judge could rule it unenforceable and every.single.employee will be released from their noncompete obligations. Most business owners know a noncompete must be limited in time and geography, but the analysis has expanded beyond these limitations.

Think Management

Noncompete agreements are designed to protect high-level information, processes and know-how. They should not be used for every employee – only the employees who are strategic within your company. Not too long ago, Jimmy John’s gourmet sandwiches settled a lawsuit for $100,000 for making its delivery drivers sign a noncompete agreement. The company suffered bad employee relations for trying to impose a noncompete on nonskilled workers and also suffered bad public relations.

Think Specific Skills

The noncompete can only prohibit an employee from taking a job utilizing similar skills with a competitor. If the employee is prohibited from taking ANY job with a competitor, the agreement will be too broad (and unenforceable). The North Carolina Court of Appeals has ruled a noncompete provision was too broad (and therefore unenforceable) because it prohibited the employee from working for the competitor “in any capacity, including as a custodian.”