What are the Basics of Non-Compete Agreements?
What are the Basics of Non-Compete Agreements?
Non-compete agreements protect employers from losing valuable trade secrets, customer contacts, and other forms of intellectual property. A trade secret is information that confers an economic benefit to a business because it is not generally known or readily learned by others. When an employee, who has obtained trade secrets during employment, quits or is fired, he/she could use this confidential information to compete with his/her former employer. The employee might start working for a competitor or open a competing business, and gain an unfair advantage by abusing confidential information about their former company’s business operations, trade secrets, client lists, or marketing strategies. A properly drafted non-compete agreement can help prevent this from occurring and provide an employer with additional legal remedies.
Elements of a Non-Compete Agreement
In a non-compete agreement, the employer agrees to provide specialized training or divulge confidential and proprietary information to the employee. In return, the employee typically promises not to work for a competitor for a certain time period, recruit employees, service or solicit the former employer’s clients, disclose or use the confidential information during and after employment. Breach of these terms can lead to non-competition litigation.
Non-Compete Agreements Disfavored?
Originally, non-compete agreements were disfavored as unlawful restraints on trade. Courts focused on the importance of a free market in our capitalistic economy. Our legal system highly values a person’s right to earn a living. However, the law recognizes that an employer’s interests may warrant restrictions on post-employment competition.
Non-Compete Agreement and Business Litigation
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This article has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorneys in connection with any fact-specific situation under federal law and the applicable state or local laws that may impose additional obligations on you and your company. © 2023 Klemchuk PLLC