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What does it take to create solid noncompete agreements?

If you keep up on the business scene in North Carolina, you probably spotted the news that some 225 employees in the state who work for Avery Dennison Corp. are being shown the door. It made headlines in the Charlotte Business Journal. The company is pulling the plug on production at two sites and moving the work to Mexico and Honduras.

Such actions don't happen without raising questions. What will happen to those workers? Did they sign noncompete agreements with the company? If they did, will they hold up in court if any legal challenges are brought? Those last couple of questions might not have been something high in the minds of many readers, but they deserve to be.

Noncompete agreements may once have been employed just within upper management ranks. But with more businesses coming under corporate ownership, the use of noncompete clauses has become more widespread. If a company feels a need to protect proprietary information, a noncompete clause is one way to do it.

Ensuring properly crafted noncompete clauses is something to which every business should strive. To do that, it can be good to keep in mind that the law tends to want to favor the worker and the worker's right to choose his or her line of work. To be sure a noncompete can withstand challenges consider the following suggestions:

  1. Have a solid business reason. Protecting trade secrets is valid. But not all employees necessarily have access to such secrets. It can help to be selective about who signs such agreements.
  2. Make it worthwhile for the employee. Contracts require that both sides benefit. Noncompete agreements are no different. In cases of a new hire, the job offer could be considered the benefit to the employee. But an existing employee might need a raise or promotion.
  3. Keep the terms reasonable. If the provisions of the agreement are too far reaching, a judge could unravel the whole contract. Something over two years could well raise an eyebrow. Blocking the individual from working in unrelated fields could be questionable, too.

Source: FindLaw, "Creating an Enforceable Noncompete Agreement," accessed April 28, 2015

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What does it take to create solid noncompete agreements? | Britton Law, P.A.