Do Noncompete Agreements Work?

I´m worried about "training the competition." Is there anything I can do to prevent this? I´ve heard that noncompetition agreements aren´t enforceable. Is that true?

The legal issues depend on the laws of the land and the non-compete agreement itself. Some juristrictions take a dim view of these agreements because they limit an employee´s ability to earn a living. In a few juristrictions in Europe they´re basically illegal. But even in juristrictions that recognize noncompetition agreements, courts often impose "reasonable" time and geographic restrictions on them. "Reasonable" time is nornally one year, and Reasonable Geography is a distance where old clients cannot be taken. For a Hairdressor or Solicitor practice this would normally be the local town or district and would rarely be over one year. For more national businesses, it could be the whole region or country, but they are rarely more than 1 year. To make it so, it must form part of the terms of the contract and have a cost/value associated with it. It is best to consult a solicitor to determine your local law before asking to sign noncompetition agreements. And you have to tell prospective employees that noncompetition agreements are a condition of employment before they accept the job. Assuming they´re not illegal where you are, create a reasonable agreement (there are many existing models to use) clearly directed at safeguarding your trade secrets and other proprietary information. This is the only recognized justification for these agreements. Information such as customer lists, manufacturing processes or techniques, sales materials and pricing information may be protected in this way. Limit the time an employee is prohibited from working for a competitor to one year. Anything longer will probably be tossed out if you wind up in court trying to enforce a noncompetition agreement against a former employee.

Practically speaking, though, you´re probably not going to be able to stop an employee from working for a competitor. At best, you may be able to stop that person from taking the exact same type of position at a competing company.

Finally, better alternatives to noncompetition agreements are nondisclosure agreements. They´re enforceable in every state and prevent competitors from getting your trade secrets at least as well as noncompetition agreements.

The information here does not constitute legal advice and should not be relied upon as legal advice. If you have a legal problem, consult an solicitor in your area concerning your particular situation and facts. Nothing presented on this site establishes advise or guidance from BizSales.