There are several different types of covenants not to compete

By: Mukeshh Kumarr
Submitted: 2008-07-22 22:44:13
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Non-Compete agreements are important tools used to protect the vital interests of a business. Businesses must often allow employees and independent contractors access to private and confidential information about their business, such as customer lists and contacts, internal pricing, marketing strategies, and strategies differentiating the business from competitors. This crucial information is created from a significant amount of time and money.

When a former employee starts a competing business or goes to work for a competitor, that private information can go with them. Sometimes, employees use a job as a stepping-stone to create their own business. Non-compete contracts can help prevent this from occurring. One popular place to obtain a noncompete form is:

There are several different types of covenants not to compete.

The most common is a restriction prohibiting an employee from working for a competitor, or from working in a competitive position.

Another common non-compete term is prohibiting the solicitation of the company's customers.

Less common is a term preventing a former employee from soliciting the remaining company employees to leave their position to work for a competitor.

Finally, since noncom Pete agreements are intended to protect company assets they work hand in hand with trade secret restrictions preventing an employee from disclosing or using company secrets

A noncom Pete agreement is a formal contract between a business and its employee. The rules differ in each state as to what makes a noncom Pete agreement enforceable, but there are some general guidelines:

The terms have to be reasonable. There are competing interests involved. The company wants to protect is assets. The employee wants to work where their skills will be used, and of course wants to put food on the table. Businesses must often allow employees and independent contractors access to private and confidential information about their business, such as customer lists and contacts, internal pricing, marketing strategies, and strategies differentiating the business from competitors. This crucial information is created from a significant amount of time and money.

This means you should tailor the non-compete to the situation:

- What is an appropriate time limit?

- What is an appropriate geographic limit?

- Should the work limitations be job specific?

- Should specific competitors be identified?

- Is a non compete required for the employee?

State specific rules also need to be considered. For instance, non compete agreements are not enforceable in California except in some limited situations such as when a business owner sells their business or when there is a partnership interest.

Some states require that the non-compete contract be established at the outset of the employment relationship. If it is signed after employment has started it may need to be accompanied by an extra payment of money or other type of real consideration. Another common non-compete term is prohibiting the solicitation of the company's customers. Less common is a term preventing a former employee from soliciting the remaining company employees to leave their position to work for a competitor. Finally, since noncom Pete agreements are intended to protect company assets they work hand in hand with trade secret restrictions preventing an employee from disclosing or using company secrets.

Other situations may prevent a non-compete from being enforced for public policy reasons. For example, restrictions on employment are typically not enforceable for doctors and lawyers.
 

Article source: Expert Articles