Business owners who have spent years developing a competitive formula that makes their company highly competitive may worry about former employees starting their own businesses using stolen business methods. Having employees sign a non-compete agreement prior to working with a business is one way employers protect their secrets and reduce future problems that may be caused by competition. Unfortunately, many companies do not realize that common non-compete agreement mistakes could render the contract unenforceable. Staying aware of issues that could prevent your business from enforcing the terms of an agreement can help you avoid a difficult legal situation in the future.
Unreasonable Time Restriction
The primary purpose of a non-compete agreement is to prevent a former employee from entering into a similar profession or founding their own company immediately after the employee is no longer working for the former company. An agreement that restricts the employee from acting as a competitor for their life-time or a period of several years may be viewed as unenforceable because of the time restriction. It is more likely that an agreement that limits entering into a competitive form of employment for a period of a few months will be enforceable. What is considered “reasonable” often varies based on industry and existing state laws.
Failing to Update Agreements
A business that has operated successfully for decades may forget to update their non-compete agreement over the years. Since business practices and employment law is constantly changing, failing to update any type of legal agreement used by your company leaves your business vulnerable. If a former employee challenges an outdated non-compete agreement, he or she has a good chance of winning the case and could create a situation in which other former employees decide to take advantage of the recently exposed weakness. A non-compete agreement should be reviewed periodically and updated by an attorney as needed.
Not Protecting Business Interests
A non-compete that is vague and does not actually acknowledge the concerns of the business owner may prove difficult to enforce. A valid agreement should protect actual business interests such as confidential information or certain company secrets. It should also focus on client relationships that are nearly permanent, meaning the former employee would have never known the client if not for his or her employment with the former company. An agreement that attempts to restrict a former employee from using information that is readily available within the industry or that is nonproprietary could lead to trouble.
Get Legal Advice
The best way to protect your company through the use of a non-compete is to make sure the agreement you create is legal and enforceable. A qualified non-compete attorney is able to review your existing agreement or help you create a new one. The attorneys at HKM Employment are able to help you protect your business by drafting a noncompete agreement that is enforceable within the state of Colorado. We are committed to helping you protect trade secrets and maintain your competitive edge within your industry. Contact our conveniently located Denver office today to schedule a consultation.