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Make sure the non-compete agreement is valid

| May 19, 2021 | Commercial Litigation |

Business owners may find themselves involved in litigation when they learn that a former employee violated a non-compete agreement. However, people need to make sure that this agreement is enforceable or they may not have a valid case.

There are several steps that employers can take to make sure that a non-compete agreement is valid.

Create specific guidelines

According to Entrepreneur magazine, a non-compete agreement should lay out the kind of specialized knowledge that an employee had. Did the employee regularly access confidential information? Does this person know how to make a product that is specific to the company? Did the company use specialized training to equip the employee for the job? A non-compete agreement should include these elements so that it is very clear whether someone has violated the agreement.

Write out fair terms

As people create the terms of a non-compete agreement, they should take a few areas into consideration:

  • Geography: Does the agreement restrict people from working in the entire state or just in the company’s usual business areas?
  • Length: Does the agreement last for the rest of an employee’s working life or does it expire after a few years?
  • Hierarchy: Do all employees have to sign the non-compete agreement or just the ones who have access to specialized information?

If these terms are too restrictive, a New Jersey court may rule that the agreement is not valid.

Use several different agreements

If a company has several branches across the entire state, business owners may want to have several versions of their non-compete agreement. According to Business Law Today, this allows people to customize the agreement so that it is enforceable in several jurisdictions. Additionally, customization allows employers to make sure their terms are reasonable for each employee. A template agreement may restrict people from working for a competitor for five years, for example. However, a customized document may allow lower-level employees to work for competitors after one year.

If business owners are careful about the way they write their non-compete agreements, they can ensure that these documents are enforceable if an employee breaks the agreement.

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