A non-compete agreement is a contract which states that a person or entity will not engage in direct competition with an entity that the first person or entity has a relationship with once that relationship terminates. Although most often it is used in an employment situation, it can be used when the parties have some other type of relationship. It is designed to prevent a person or entity from using the knowledge and skills learned through the business relationship to benefit another company offering the same type of services or product. Non-compete agreements can thus protect the integrity and success of a business. However, used incorrectly, these agreements can open businesses to lengthy and costly litigation.
Specifics of A Non-Compete Agreement
It is only natural to protect your company from being exploited by others wishing to gain an unfair advantage by draining your company of its uniqueness and competitive edge or from employees sharing sensitive or confidential information to competitors. It is important to understand some key issues about this topic, including but no limited to, what types or relationships are ripe for a non-compete agreement, what type of provisions should be includes and are they enforceable, and what are the limitations of such agreements.
Agreements with no geographic limitations may be deemed unreasonable, overbroad, or unlimited in scope, and be frowned upon. It is recommended that non-compete agreements cover only a specific radius or area. In addition, as with the issue of geographic coverage, agreements with no time limit are frowned upon, and are less likely to be upheld in court.
In addition, as with the issue of geographic coverage, agreements with no time limit is frowned upon, and less likely to be upheld in court.