Question

Imagine that you are starting your own company in your hyper-competitive industry: You are putting your life savings, your professional contacts, and your innovative ideas on the line. As you begin to hire a sales force, you consider binding new employees to noncompete agreements. Outline the ideal terms of your employees’ noncompetes. What is its duration? What is its geographical radius? Are these terms appropriate for your industry? When you are done, pass your proposed terms to classmates and discuss its enforceability.

Answer 1

A non-compete agreement is a clause that is made by the companies to retain employees. It is an agreement where one party agrees, usually an employee agrees not to enter into or start a similar profession or trade in competition against the employer.

 

The ideal terms of an employee’s non-compete agreement are explained below:

• Type of employment: Under this clause, an employee of a given company is barred from working for a competent company in the same industry. However, there is not restriction in finding employment in a different field.

• Timing: Am employer may add a timing clause wherein an employee is asked to leave an organization within a stipulated period of time. Two to five years of time period is standard, though the details would differ according to the type of job.

• Geographical location: This clause asks departing employee to seek employment in the same industry, but only outside a specified geographical area. In some cases, employed are barred from working in any state where his/her prior company does business.

 

The above stated clause may or may not be appropriated for a XYZ company. The company may add the number of clauses depending upon the employee code of conduct.

 

If an employee is a serious threat to an organization then, the employer may add strict clauses. Under the strict restrictions, an employee would be left with few options to do job or start a new business. The action results in dampening an employee’s carrier.

 

However, if an employee is not a threat to an organization, then the company can add few clauses from the point of security reasons.

 

Once the company set terms and conditions in non-compete agreement, the employer can notify the same to an employee in one on one meeting and let him/her explain the consequences of leaving the organization.

 

An employee ensures that if an employee is found to violate the terms and conditions of the non-compete agreement, then an employee may face strict legal action.

An employee ensures that if an employee is found to violate the terms and conditions of the non-compete agreement, then an employee may face strict legal action.