Non-compete agreements are simply a fact of life in the world of business. When it comes to protecting your legitimate interests, they are an important and valuable tool. However, if you need to file a lawsuit to enforce a non-compete agreement, you may find that the court tries to either invalidate it entirely or place limitations on it.
Nevertheless, it is possible to write an agreement that the court is likely to uphold. The American Bar Association offers the following best practices for writing enforceable non-competes.
1. Acquire necessary signatures
A non-compete should be a binding contract between you and your workers. Therefore, you should not only obtain employee signatures, but you should also sign the agreement yourself.
2. Provide adequate consideration
When you impose restrictions or limitations on employees’ activities, you need to offer them something of value in return. The legal term for this is a consideration. If you are asking a new employee to sign a non-compete agreement, the job offer itself is sufficient consideration. However, you must offer existing workers something more, such as a special bonus, stock grant or promotion.
3. Limit the scope of the restrictions
The court will make a determination as to whether the restrictions that you have imposed on your employees are reasonable. The broader the terms of your non-compete agreement, the more likely the court will be to reject it. Limit its scope to a specific geographic area, such as a particular city or state, and impose a reasonable time limitation, such as one year.
4. Do not involve all employees
If you ask all employees to sign a non-compete agreement, the court may find that this unreasonably imposes an undue hardship on some of them. Only require it of employees with access to sensitive information.
These tips will not guarantee that the court will uphold your non-compete agreement. However, they may improve your chances of enforcing it successfully.
