The Small Business Non-Compete Agreement: Why It’s a Good Idea

Simply put, a non-compete agreement is a document that prevents employees from divulging sensitive and privileged information for their personal gain. Sometimes employees can unknowingly disclose confidential information to their new employer, so having a non-compete agreement in place can safe-guard all parties involved.

When a valuable employee leaves your company their knowledge of your daily operations and in some cases your competitive edge, leaves with them. Whether it is for their personal gain, or to give a competitor an advantage, their knowledge is marketable. To protect your ideas, creativity, and trade secrets you should implement a policy to have employees sign a non-compete agreement. According to the International Trade Administration, business trade secrets can be processes, formulas, programs, methods, techniques, patterns, or devices that provide you with a competitive edge. As a business owner, you have a right to protect these as you would your assets.

First and foremost, the agreement needs to have a solid business reason to be drafted in order to hold up in a court of law if contested by a former employee. When thinking about what to include, a waiting period should be specified in which employees are expected to refrain from working for competitors after leaving your company. Also, geographic limits can be specified to prevent the employee in question from working in the same type of business within a certain distance from your company. Since the laws vary from state-to-state where non-compete agreements are concerned, you should explore your local laws prior to drafting your agreement.

Wanting to protect your ideas and competitive edge from those in the industry is natural, however, making every employee sign a non-compete agreement might backfire in front of a judge. Not every employee has access to truly privileged information. Decide which employees truly know the ins-and-outs of your business or regularly work on confidential material and have those individuals sign the agreement.

You put a lot of thought, work, and money into your company. Protecting how you do business is as important to your continued success as your daily operations.