You have invested time into training your employees, but how can you project yourself from these employees using that information to compete against you in the future? If you own a business, you need a non-compete agreement to protect your business from employees using or sharing your confidential and proprietary information with your competitors.
While the courts generally have not looked favorably upon non-competes, an agreement that includes reasonable terms and conditions is more likely to be enforced. The attorneys at Spadea Lignana work with employers to draft non-compete agreements that hold up in court and prevent future legal difficulties.
Enforceability of Non-Compete Agreements
A properly-written non-compete agreement can protect your business from any negative effects of an employee leaving. This can effectively preserve your client base and protect your business, provided it is enforceable. Pennsylvania law typically enforces non-compete agreements that meet the following criteria:
- Protects a legitimate business interest
- Does not deprive an employee of a right to make a living
- Does not impose an unreasonable geographical limitation on an employee
- Does not remain in effect for an unreasonable amount of time
Who Should Sign a Non-Compete Agreement?
Not all employees need to a sign a non-compete agreement. Employees who do not have an essential function in the company typically should not be asked to sign non-competes since it is difficult to establish a legitimate business purpose in doing so and may prevent the individual from being able to make a living after leaving the company.
As an example, asking a Chief Financial Officer (CFO) to sign a non-compete is different than asking a secretary to sign a non-compete. The former CFO can leave the job and find non-competing employment and is privy to important internal information creating an essential business purpose for the non-compete agreement. In most cases, there is not an essential business purpose for the company to have a secretary sign a non-compete.
When Should You Ask an Employee to Sign a Non-Compete?
In many cases, it is best to have an employee sign a non-compete agreement prior to or on their first day of work for the company. If you ask an employee to sign the agreement after he or she has been working for the company, you are required to offer some sort of compensation or benefit (“consideration” in legal terminology) for signing it.When an employee receives a non-compete prior to his or her first day of work, the job itself is usually considered adequate “consideration” by the courts.
Enforceability of the non-compete will depend in part on whether or not a restrictive covenant serves an essential or important business interest for the employer and whether some sort of compensation has been given. Acceptable forms of consideration may include a pay raise, additional stock options, more vacation, or other material or substantial incentive to offset the restrictions of a non-compete agreement.
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Get Help Drafting a Non-Compete Agreement
Our approachable and accessible lawyers have helped numerous companies navigate the murky waters of non-compete agreements. We understand non-compete laws in Pennsylvania and have the resources needed to help you avoid costly litigation and future legal difficulties. To discuss your situation, contact the non-compete agreement attorneys at Spadea Lignana today.
