NON-COMPETE AND NON-SOLICIT AGREEMENTS: WHAT ARE THEY? AND SHOULD I HAVE IT REVIEWED?
1. WHAT IS A NON-COMPETE?
A Non-Competition Agreement or a Non-Compete is an agreement between an Employee and his/her Employer. The reason behind this agreement is to prevent the employee from either joining a competing business or even starting one of its own to compete with the previous employer. A non-compete may just be a section in the Employment Contract or a Separate Contract during the onboarding process.
Usually contemporaneously with a Non-Compete, a Non-Solicit is also signed by the employee. This is often signed so that the employee may not use the goodwill of the employer with its clients to his advantage or lure in the clients of his previous employer due to the employee’s own goodwill with the clients. The main rationale behind a non-compete is to save the business of the employer from any irreparable loss or injury.
Non-competes are enforceable where the below points are met:
- There might be irreparable injury to the Business of the Employer.
- The duration of the Non-Compete is not arbitrary, usually a Non-Compete period lasts from 6 Months to 2 Years.
- The Non-Compete only covers the area of the business of the Employer, more specifically, an area that the Employee otherwise worked or was privy to confidential information while employed.
- The Geographical scope of the Non-Compete limited. This issue is debatable where the business is digital in nature.
Non-competes are no enforceable where:
- If it keeps the employee from using his skills or knowledge that he did not get during the course of his employment.
- The non-compete shall not be enforceable if it somehow creates a monopoly for the employer getting the Non-Compete signed.
- The Non-Compete does not put restraints in the future growth and success of the employee.
2.NON-COMPETE: EMPLOYEE’S PERSPECTIVE
For a Non-Compete Agreement to be enforceable by law it should be reasonable and just and should not put unnecessary barriers on the employee to grow in the future.
For it to be A Legitimate Contract, the agreement should be in place to Protect a Proper Business Interest or what some would say the Trade Secret of the Business.
Earlier, A Non-Compete was usually signed by senior level employees but nowadays the Businesses have made it Habitual for every new employee to sign a Non-Compete Agreement.
Few Points that an employee should keep in mind before signing the Non-Compete:
- What businesses are considered as competitors to the present employer?
- How long would the Non-Compete period last for?
- What geographical cover does the Non-Compete contain?
- Can you get legal advice before signing the Non-Compete?
- Is there any consideration involved, if the employer has asked to sign the Non-Compete during the course of the employment?
- Before signing the Non-Compete, it is important for the employee to understand each and every word of the agreement.
No Specific Law requires an employee to sign a non-compete but it has become a common practice by the employers to get a non-compete signed. It should be a common practice by the employees to review the Non-Compete or even get legal guidance before signing the non-compete. Because signing a non-compete without review can get the employee in a lot of restraint to work somewhere else.
As a Non-Compete is a CONTRACT, the employee can negotiate the terms with their employers.
In summary, before signing a non-compete, consult an Employment attorney!