The benefits of creating a non-compete clause

The benefits of creating a non-compete clause

| Oct 8, 2020 | Firm News |

It’s a competitive marketplace, and the success or failure of a business often comes down to how well they protect their confidential information. One tool business owners have at their disposal is a non-compete clause. A properly drafted and enforceable non-compete clause can help ensure ethical business operations and reduce the threat of unfair competition.

Protecting the disclosure of privileged information

Your company likely invests a lot in training your employees. Over time, your employees will probably have access to several types of confidential information concerning your business practices. Trade secrets are vital to the success of any company. The last thing you want is for your employees to take a job at a competitor with your trade secrets in hand.

A non-compete agreement can prohibit employees from working with a competitor immediately after leaving your company. They can also be used to prevent an employee from opening a business of their own with the competitive edge provided by your trade secrets.

Stopping unfair competition

Another advantage of a non-compete agreement is that they can prevent a business owner from soliciting customers from a company that they just sold. You can tailor the agreement to prevent the previous owner from opening up shop within a certain distance of your company. You can also craft an agreement that prevents the previous owner from opening a business within a specific time frame.

Ensure the agreement is enforceable

Non-compete agreements have been the subject of much litigation in recent years. Some states have even gone so far as to ban their use altogether. It’s important for you to ensure that your non-compete agreement is enforceable. One way you may do so is to limit its scope. It’s probably not necessary for every single employee on your payroll to sign a non-compete agreement.

Given enforceability issues and the surrounding history of litigation, you should work with a skilled professional if you’re considering drafting a non-compete agreement. A business law attorney can help you protect your interests.