A non-competition agreement is a common document signed at the time of hiring. While some newer employees may express concerns, the agreement is highly effective for business owners. As long as the non-compete agreement can be enforced, it offers your business additional security for strength and growth. Typically, it is completed during the human resource management process. However, a non compete has a number of implications for your employees. Here’s what the agreement will mean to your team.
Non-Compete Clause Meaning
Also known as a covenant not to compete (CNC), the clause explains the relationship between the employer and employee. Upon leaving the company, the employee agrees to not compete with the company for a per-determined period of time. This would include working as an employee, officer, director, partner, consultant, agent, owner or other role with a competing firm. As a result, the employee is not allowed to work for the competition upon leaving your business.
Stealing Is Not Okay
When companies are in highly competitive situations, one might try to steal another company’s employees. In many cases, the employee who changes employers will divulge sensitive information. Of course, it is the business process and information that makes a business franchise what it is. This might include both protected and unprotected intellectual property of your company. When the information is “bought” by a competing firm, they can gain an unfair competitive advantage by employing your former employee. To discourage employees from changing positions to give away company trade secrets and process, a non-compete agreement offers protection.
Increased Employee Buy-In
Since the non-competition agreement offers protection, employees are more likely to buy in. When individuals know that there is a legal contract binding them from “selling” company secrets, they are more likely to stay and succeed at your business. After all, it is only fair that company has invested in the employee can trust they won’t run away with their secrets. Otherwise, companies would very rarely trust employees who would like to work with the intention of moving away anytime. With the proper incentive in place, employees buy-in and succeed with the company. Of course, the grow within incentive is best for you, them and the customers.
Reasonable Non-Competition Agreement
If written too broadly, the non-compete agreement could stop employees from working anywhere. The agreement must be written to protect specific business interests. The duration and scope of the agreement should be reasonable for employees. It will tell them that you are genuinely concerned about the business and it’s knowledge base. Moreover, they are more likely to appreciate the level of detail your business takes to care for it’s people and processes. With a well balances and fairly written non compete, employees are more likely to see that you are reasonable and fair employer too. They will not mind signing it if they see the fair aspects of the agreement.
California Non Competes Are Different
Certain states, like California, have completely banned non-competition agreements. While you can ask an employee to sign one, the contract itself is unenforceable in the state of California. Other states including Texas, Utah, Illinois and Virgina, there are several provisions for the legality of a non-competition agreement. To employees in California, the agreement means almost nothing because the courts will not enforce it. As a result, they are able to leave and transfer information from old to new companies.
To be successful, companies must be willing to invest in their employees. To incentivize employees to grow and learn with the company that invested in them, non-competes stop bad employees from stealing information. It offers the company protection to train and increased buy-in from team members. Additionally, it creates a fair level of business conduct in most states outside of California. Of course, your non-competition agreement should help employees grow within your company and leave for legitimate reason, not to sabotage your company.
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