Any business owner can tell you; strong employees are one of the keys to success in any industry. Every business has at least one employee who plays a major role in the success of the business.

But, what happens if that employee leaves the company? How do you prevent them from leveraging the skills and knowledge they’ve amassed working for you and using them for the benefit of your competitors?

Enter the non compete agreement, which can help protect you from this exact scenario. But, many non compete agreements are clumsily written and don’t hold up in court. Today, we’re going to discuss how to avoid some of the pitfalls common with non compete agreement templates, and how you can draft your own highly enforceable document.

What a Non Compete Agreement Can Do

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Non compete agreements safeguard employers against the prospect of having their trade secrets, proprietary information or customer base compromised by a former employee.

When an employee leaves the company, either because they’ve quit or been fired, they take the training and information they’ve been provided with along with them. A non compete agreement is a legally binding document that prevents your former employee from using the critical information they’ve obtained through their employment with you to the benefit of your competitors.

When the document is properly written and enforceable in court, both your former employee and their prospective new employer will think twice before hiring that employee, as it can open the door for serious legal action.

The Problem With Many Non Competes

When the document is properly written and enforceable in court, both your former employee and their prospective new employer will think twice before hiring that employee, as it can open the door for serious legal action.

Things to Consider When Drafting a Non Compete Agreement

By following these tips, you’ll be able to create a reasonable document that is easy to enforce in court. Whether you’re writing your own non compete, having your lawyer write one for you, or looking for a non compete agreement template, you’ll want to make sure that you address the points below in your final document.

Make Sure It’s Legal

Before you even get started, you’ll need to consult your local laws on non compete agreements. In some states, such as California for example, non compete agreements are outright illegal. Other states restrict the type of employees who may sign non compete agreements.

Since the laws of each state can vary widely, it’s important that you ensure that the state you conduct business in allows for non compete agreements. If not, there may still be options for your business, such as a non disclosure agreement.

Be Reasonable

As we mentioned above, the court is much less likely to enforce a non compete which seems oppressive and greatly restricts the former employee's ability to earn a living. This means your document should be very specific to your business.

If you’re a regional business located on the west coast, don’t expect the court to enforce an agreement that prevents the former employee from accepting a similar job in New York.

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You’ll also want to be sure to set a reasonable time frame for the agreement. A bulletproof non compete usually restricts the former employee for a period of 6 months to two years. Anything longer than that is considered unreasonable, and may not be enforceable.

For upper-management level employees, such as a CEO, for example, it’s not uncommon for a non compete agreement to last longer than the two-year maximum that’s usually applied to mid-level employees.

Finally, don’t include language that’s overly restricting of the type of work the former employee can conduct. If your former employee worked for your company as an account manager, don’t expect the court to enforce a non compete agreement should the former employee take a new job outside of the account management field.

Have a Good Reason For Requiring the Agreement

When it comes to these agreements, the court expects you to have a good reason for requiring a non compete agreement. In most cases, the reasoning is that you need to protect your trade secrets and proprietary information from competitors.

When having employees sign non compete agreements, make sure that they genuinely possess trade secrets and confidential information. In other words, don’t expect the court to enforce a non-compete agreement for your cleaning crew.

Make Sure There is a Benefit to the Employee

Non compete agreements are useless in court if the plaintiff cannot prove that there was a mutual benefit between the two parties that entered into the agreement. In exchange for the employee’s promise of noncompetition, the employee must, in turn, receive something of value.

This is easy to do with new employees. Many employers who require non compete agreements make it a contingent of the job offer. For example, if you sign this agreement, I will then offer you a position within my company.

For existing employees, this is usually more difficult. If you’re asking an existing employee to sign a non compete agreement, you’ll probably need to offer them a raise or promotion in exchange for them signing the agreement.

Include a Choice of Law Provision

A critically important aspect that’s often overlooked is the choice of law provision. Many businesses wrongfully assume that any disputes arising from the agreement will simply be adjudicated in their home county. This is not the case.

Non compete agreements (and any legally binding document for that matter) should explicitly state the law under which they are written, and explain what venue any disputes will be heard in. This will prevent you from having the case heard in a location that may have very different laws relating to non compete agreements compared to the laws you expected to govern the agreement.

Before Using a Non Compete Agreement Template

While a non compete agreement template is a quick and easy way to create a document, you’ll want to take extra care in evaluating every section of the agreement before using it. Ask yourself, are the courts going to enforce this document the way it is written?

For most businesses, a non compete agreement template offers a great starting point when drafting a document. Feel free to alter the template as necessary so that the document is clear, reasonable, and most importantly, enforceable.

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By following the tips we’ve outlined in this article and ensuring that each aspect of what we’ve covered is included in the document, you greatly increase the likelihood that your non compete will hold up in court.

Keep in mind that even though a template takes most of the hard work out of creating this type of agreement, not everyone feels comfortable drafting legal documents. If that’s the case, speak with your lawyer and discuss the best way to proceed.

Often, it’s worth the expense to have your lawyer draft a non compete agreement on your behalf. By seeking the help of a legal professional with experience in the field, you can rest assured that your non compete agreement is going to be fair to all parties, and most importantly, enforceable in court.