It is not uncommon for employers to require new hires to sign a non-compete agreement. Depending on the scope of your business, you may wish to include one as part of your onboarding process as well. A good non-compete agreement can protect your business from the competition of an ex-employee.
However, it is very easy for an ex-employee to have the courts throw your non-compete agreement out if it is not “reasonable.” According to FindLaw, in order for the courts to find your non-compete agreement “reasonable,” you must carefully consider the duration and scope of the agreement.
What is a reasonable duration?
The purpose of a non-compete agreement is to protect your company’s valuable intellectual property from competitors. However, it is unlikely that much information related to your business needs to be confidential eternally.
If you are protecting information with the agreement, your non-compete agreement should do so only for as long as that information has value to your company. The exact nature of a reasonable duration will depend on your particular company and the information the non-compete agreement is protecting.
What is a reasonable scope?
In the majority of cases, “scope” refers to how broad the geographic location the non-compete agreement applies to is. In many cases, this is to prevent an ex-employee from setting up a competing business in the same area.
However, just like with duration, you will need to consider what a reasonable geographic location for your business is. It is not possible for you to prevent an ex-employee from setting up a business at all. Generally, if your non-compete agreement appears to impinge upon the ex-employee’s right to have a livelihood, the courts will not find it valid.