Non-Compete Agreements

What is a non-compete agreement?

A non-compete is a legal contract whose main purpose is the protection of specific sensitive information of a company that its business partners, clients, independent contractors or employees can know or come into contact with while working with or for the company. When a person knows about certain sensitive information of a company, a non-compete contract forbids the individual from using that information to compete with the company.

Not all business partners, employees, independent contractors or business clients may be requested to sign a non-compete contract. It is usually reserved for parties who will have access to a company’s confidential or mission critical information that can affect the operation, profitability or even survival of a business.

A non-compete by can be initiated by any party to a business relationship, including an individual who has an idea and wants to enter a relationship with an established company. Similarly, A non-compete agreement between an employer and an employee involves an employee agreeing not to be in competition with his or her employer both during and for a specified period of time after termination of the employment. In other words, such an agreement prevents an employee from getting involved in a market or business that is in direct competition with the employer. Employers make use of non-compete agreements to enforce and prevent the employees from getting into competition with them after they exit the company, or otherwise using their intimate knowledge of company trade secrets to harm the company in one way or another.

Whenever a non-compete agreement is to be created and signed, it is usually a good idea to have it drafted by an experienced business attorney as any error in the document or its terms can potentially render the contract null and void, or can otherwise be found to be unenforceable by a competent court of law if it is challenged.

A non-compete contract becomes effective for a specific period of time, usually from the time it is signed by all parties, and often up unto after the business relationship ends, potentially up until a time in the future.

Should You Sign A Non- Compete Agreement as a Business Partner?

If you are in a business partnership with an individual, both of you might decide to dissolve the partnership in the future, with a party retaining the business. The individual retaining the business would want the other party not to be in competition as one of you might want to start a new company in a similar field. The party retaining the business or starting a new company might believe he won’t succeed with his former partner in competition. Including a non-compete clause in a business sale or business dissolution is a relevant reason for a non-compete contract between business partners.

Should You Sign A Non- Compete Agreement as an Employee?

Firstly, you signing a non-compete agreement or not is dependent on how desperate you need the job. Those that seek job offers are oftentimes more likely to be asked to sign the agreement than those currently employed. Once you sign the agreement, you will become bound by its terms and conditions should you leave the company later on.

A non-compete agreement is legally binding if it is reasonable. If you are asked to sign a non-compete clause, you should ensure you closely review it to determine how reasonable it is.

Therefore, before you sign a non-compete agreement, you should ensure you review it and seek a legal counsel to advise you of your rights.

How Can You Defeat A Non-Compete Agreement As An Employee?

Wise employees will seek an legal counsel before signing a non-compete. However, you can still have legal arguments to defeat a non-compete agreement if you signed without seeking a legal advice.

Here are few ways by which an employee can defeat a non-compete agreement:

  • Breaching of the contract by the employer.

Non-compete agreements provide employment benefits such as insurance, compensations and other employment conditions.

As an employee, you are relieved of all obligations under the non-compete contract if your employer breaches the agreement by failing to fulfill all compensation dues, insurance requirements, or other necessary obligations.

  • When your Employer has no legitimate interest to enforce.

This is a common mistake made by employers.  For example, no employer has a legitimate business interest in enforcing a non-compete against low-level employees such as clerks, cleaner or receptionists.

Here is another instance; an employer who produces computer software for lawyers has no legitimate interest in preventing an employee from working on software for financial analysts. An employer who abandons a particular client, line of business, or product has no legitimate interest in the abandoned field.

Disputes Pertaining To Non-Compete Agreements

Some non-compete contract disputes may involve the following;

  • Failure to inform your employer of work or projects with other organizations
  • Revealing the trade secrets or sensitive information of the company to another party with no authorization.
  • Employing other workers while working for/ with a company
  • Giving the company’s competitors the access to the company’s products, strategies or ideas

Most non-compete contract is centered on protecting the confidential information of the company. Also, non-compete are focused on security an employee’s work status with a single company.

How Can You Settle Disputes Related To Non-Compete Agreements?

There are ways for individuals or business owners to settle non-compete agreement disputes without going through litigation.

These out-of-court solutions are;

  • Mediation
  • Negotiation
  • Arbitration

However, these measures may not be effective if the disputes are very contentious, making it difficult for both parties to agree to any means of resolution. It might also be highly complex for the judge as the ultimate arbiter to give a ruling. Thus, in this situation, litigation cannot be avoided.

Conclusion

As a party required to sign a non-compete agreement, you should seek an attorney to state your rights before you sign a non-compete agreement.

For business partnership, hire an attorney to help you with a clause which defines the manner in which you want to settle any disputes relating to non-compete contract. This will determine if you would go to a court or make use of an arbitrator if you have any disputes to settle. This clause will include legal dues or damages for the party who wins the case.

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