The basics of a non-compete agreement

On Behalf of | Oct 22, 2020 | Commercial Litigation

Hiring new employees is necessary for businesses in Texas and elsewhere. This is true when they are either seeking to keep the status quo of business operations or expand them. However, when bringing a new employee on board, certain aspect of the business may need protection. This is when including a non-compete agreement in the hiring process can be valuable and lucrative, as it can ensure the safety of the company while the employee is employed and after their employment is terminated.

Non-compete agreement

At-will employment, which is common is most companies, means that an employee could leave at anytime to pursue other ventures and opportunities. However, this could mean that they could seek opportunities with the competition. In order to guard against this and protect one’s company, a non-compete agreement could be entered into. While this agreement is crucial to providing protections to the business, there are restriction and limitations to them.

In simple terms, a non-compete agreement is a formal contract between an employer and employee. The purpose of this restrictive covenant is to limit the employee’s ability to engage in competition with the employer during employment and after a certain period of time has passed after their employment has ended.

Limits and restrictions

Although a business would like to keep these protections for the longevity of the business, this is not possible. An employee must be employable after employment ends, which means that the restrictions outlined by the agreement cannot make it impossible for the employee to obtain gainful employment once employment ends. This means that it cannot be too restrictive when it comes to geographic terms and the duration of the covenant. They must also be reasonable, such as not creating their own competitive work or working with a direct competitor for a set duration of time.

Whether it is a non-compete agreement or another type of business agreement or contract, it is important that companies understand how these documents could help better their business now and into the future. Drafting, effectuating or enforcing these agreements can be a process, making it imperative that one understands how to include these agreements in their everyday business and ensure they are valid.