All employees will discover and learn aspects about their jobs and about your company that may become a particularly sensitive issue when an employee leaves the company. While depending on state laws, employers can add a certain amount of protection through the use of properly written non-compete agreements.
It is generally understood that a former employee may eventually be in a new job position that could be in competition with the former employer. For example, an electrician may not necessarily prevent a former apprentice from opening up his or her own business in the same neighborhood. However, an employer may restrict the former employee from entering into a certain scope of competition through a covenant not to compete. Since specific restrictions and steps can apply, such agreements and covenants should be reviewed by an attorney.
In determining whether or not entering a non-compete arrangement makes sense for your business, the agreement should:
- Be crucial to protect the interests and survival of the business.
- Not limit the employee in a manner that goes beyond what is reasonable to protect your business interests. (Example: If your CPA firm focuses on clients in Arizona, then restricting the former employee from practicing in Florida would be deemed unreasonable.)
- Not subject the public with a loss of access to the former’s employee’s service or skill.
- Be a legitimate binding contract such that the former employee receives something in return by signing such an agreement (i.e. monetary compensation).