Is your non-compete agreement “reasonable?”

A non-compete agreement is somewhat unique in the world of business, as it does not come into effect until after the interested parties cease working together. Typically, businesses require employees to sign non-compete agreements at the time of hiring.

A non-compete agreement should protect the business interests of the employer after an employee leaves the company. However, according to FindLaw, an enforceable non-compete agreement must be reasonable in terms of duration and scope.

What is a reasonable duration?

The idea behind non-compete agreements is to protect legitimate business interests, including sensitive information. However, it is essentially impossible to swear an employee to secrecy for all time.

This means that you must carefully consider how long the information the non-compete agreement is protecting is valuable to your company. You must show that whatever length of time you are asking for in the contract is “reasonable” in terms of your particular business. This will differ depending on what you do.

What is a reasonable scope?

A non-compete agreement’s concept of scope can vary. Most commonly, “scope” refers to the geographic area the agreement refers to. Essentially, a good non-compete agreement should protect you from an employee quitting his or her job with your company and then opening a competing business across the street.

However, just like you cannot swear an employee to secrecy forever, you also cannot prevent an employee from starting a business in any geographic location. If the scope of your non-compete agreement is too wide, it is highly likely that the courts will narrow the scope for you. It is better to have a reasonable non-compete agreement to begin with.