Should You Use a Non-Compete Clause in Your Business?

In today’s competitive market, businesses are often faced with many legal issues when it comes to protecting their assets. While trade secrets and other confidential information can be safeguarded through non-disclosure agreements, in some cases an employer may want to ensure an employee does not compete against them after termination. In this case, a non-compete clause can be beneficial.

 What is a Non-Compete Clause?

A non-compete clause (NCC), is a legal contract that prohibits an employee from conducting business in direct competition with an employer within a certain period of time after leaving the company. In some cases, it may also be referred to as a covenant not to compete (CNC) or a non-compete agreement (NCA).

Why is a Non-Compete Clause Important?

A non-compete clause is important because it protects a company’s confidential information and prohibits a former employee from using those secrets for their own advantage in competition against the business. For example, if a salesman leaves a larger paper company and goes into business for himself, a valid non-compete clause could specify that he would not be able to set up his paper company within 50 miles of the large company for a duration of two years after leaving.

What Happens if you Violate a Non-Compete Clause?

In order for a judge to uphold a non-compete agreement, the contract must be valid and “reasonable,” meaning it can’t be too restrictive. The contract should be clear with details such as how long it lasts and exactly what constitutes “competition”.

It is important to note that some states do not enforce non-compete clauses or are very limited in what they will allow, in the interest of free enterprise. In states where a non-compete clause is found to be valid, and has been violated, the result can include hefty fines and lengthy litigation.

Whether you are an employer who wants to protect your business trade secrets, or an employee who has been asked to sign a unclear non-compete agreement, our highly-qualified attorneys are ready to help. Contact Churchill, Quinn, Richtman & Hamilton, Ltd in Grayslake to get started!

Additional info referenced here and here.