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Potential limits to non-compete agreements

On Behalf of | Jul 8, 2022 | Business Consulting & Advice |

Non-compete agreements can be a great tool to help protect your business. You don’t want your employees to come to the company, learn how to work in the industry, take your intellectual property and company secrets, and then go off and start their own businesses. You also don’t want them to take this knowledge and information to the competition and directly harm your company.

For all these reasons and more, many business owners will use non-compete agreements that state that workers cannot take similar jobs or start their own businesses in the same industry. But there are some limits on how you can do this that you need to be aware of.

The timeframe must be reasonable

You can’t enforce a non-compete agreement that has an unreasonable timeframe. For instance, even if an employee signed the agreement, it can’t say that they can never work in that industry again. Most non-compete agreements only run for a handful of years, or even less.

The geography must make sense

There can also be some geographical limitations. If someone wants to start a competing business in the same town, it’s clear that that’s detrimental to your business. If they want to move to another city or even another state and start a similar business, you likely can’t prohibit them from doing that.

Do they work for all employees?

Finally, there can be some restrictions that make it so you can’t use these for all of your employees. Many low-level employees can’t be bound by non-compete agreements because it would seriously hinder their ability to make a living, but executives and others higher up the corporate ladder may need to use them.

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