Your company has grown, and its success has as much to do with the employees who develop and sell your innovative products.
As a business owner, you want to ensure that employees will stay on board and not take their skills and your company information to a competitor. This may be the time to create a non-compete agreement.
What is a non-compete agreement?
A non-compete agreement prohibits a departing employee from engaging in competition or going to work for a competitor within a certain period of time. For example, you may terminate an employee who worked on the design of your top-selling widget, and, under the non-compete arrangement, prevent him from joining a competitor for three years after leaving your company.
A non-compete agreement may be part of an employment contract, but it often stands alone. To ensure that it is enforceable, you should include certain information including:
- The meaning of “working for a competitor”
- The period of time during which the departing employee may not compete in any way with your company
- The geographical scope that makes up “non-compete” territory
- Why the agreement is necessary and when it will begin
- How you will compensate the departing employee for signing the agreement
In terms of compensation, you could offer the employee a higher salary while working for your company, a higher level of training or access to promotions. Some employees who sign a non-compete agreement also expect a long-term severance arrangement. Non-compete requirements can protect you, your products and the company in general. Professional drafting and review of your company’s non-compete agreement will ensure that you avoid making any legal missteps.