Non-compete agreements


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Updated: 4/11/2007 10:26 am Published: 4/11/2007 10:26 am


Losing an employee to a competitor can be a major concern for any company, especially if the employee chooses to take private or valuable company information to the competitor. Such instances can create an unfair advantage and cause considerable damage to a company's profitability. One solution companies often employ to prevent sensitive information or trade secrets from leaking to competitors is requiring all new hires to sign what's known as a non-compete agreement. A non-compete agreement is a written contract between an employer and an employee that usually contains a promise by the employee not to work for the employer's competitors for a specified period of time, usually two years. The contract can be particularly useful for employees who have access to information that's critical, either through job responsibility or through social interactions with owners or high-level executives. While the signed non-compete agreement doesn't provide guaranteed protection against leaks, it serves as a clear reminder to former employees of their legal responsibility. Generally, the enforcement of non-compete agreements is carefully restricted. They are enforceable only if a legitimate business interest of the employer is in jeopardy and the time frame prohibiting the employee to work for a competitor is reasonable. While there is no federal law regarding non-compete agreements, employers should consult state regulations before using such a contract, as some states may prohibit its enforceability. Employers may be entitled to an injunction or punitive damages if a former employee breaks the terms of a non-compete agreement.

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