When a company hires a new employee, it can put itself in a vulnerable position by providing the employee with inside information and trade secrets. In order to protect its own interests, many businesses opt to have new employees sign a non-compete agreement. These agreements state that the employee is forbidden from releasing any proprietary information to the employer’s direct competitors or other third parties. The agreement typically remains in effect even after an employee has left a company. If it is violated, the former employee can be sued for breach of contract.
What is Included in a Non-Compete Agreement?
In a standard non-compete agreement, the employer specifies the information that is considered classified or confidential. This may include marketing plans, customer lists, company database details and related business information. Most non-compete agreements also stipulate that the employee can’t work for a direct competitor of the company within a certain geographical region for a specified length of time.
A confidentiality agreement is a separate document from the non-compete agreement although it is usually signed at the same time. In many cases, a confidentiality agreement extends beyond the scope of employee and employer. Businesses that the employer contracts with, such as banks and construction companies, are expected to limit the sharing of information to people who have a legitimate business need to see it.
What Happens if the Contract is Violated or Disputed by the Employee?
Some people who sign non-compete agreements discover later that they regret the decision. This is due to the effect it has on earning a comparable living in the same geographic location after leaving the past employer. When a non-compete lawsuit is filed, the judge in the case carefully weighs each party’s arguments. For example, if the contract required someone to decline employment with a competitor for five years within a 100-mile radius of the original employer, the court might see this as unreasonable and nullify the contract. In the interest of fairness, the judge in this situation may uphold the employer’s right to confidentiality by requesting that the contact be re-written in less punitive terms.