Definition: Contracts between you and your employees in which your employees
promise not to take what they learn while working for you and use
it against you while working for a competitor. A typical noncompete
agreement says the employee agrees not to work for rivals, solicit
business from current clients, or otherwise compete with you for
some period of time, such as a year, after leaving your company.
If you're worried about losing your key employees or trade
secrets to a competitor, you might think about having those
employees sign a noncompete agreement, which would prevent them
from immediately leaving your employ and working for one of your
rivals or using the information they gleaned on the job against you
in some way. Although some companies have all their employees sign
the same noncompete agreement when they join, this probably isn't
the best way to go about it. General agreements signed by all
employees tend not to hold up in court. So it is better to write
noncompete agreements only for key employees. And make them
specific.
You should also take care to learn and understand the laws
regarding noncompete agreements in any state in which you do
business. For example, California and Texas state laws tend not to
support employers in disputes involving noncompete agreements.
Don't keep your noncompete agreements secret. Let employees know
the company's policy. Let competitors know it, too, so they won't
be tempted to raid your employees. A company that hires a rival's
employee in violation of a noncompete agreement may be faced with a
lawsuit. Finally, when employees are leaving the company, remind
them of the noncompete agreement they signed and go over it with
them to make sure they realize what restrictions they may have to
observe.