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Do non-compete agreements help businesses?

On Behalf of | Apr 6, 2022 | Contract Disputes

A non-compete agreement contract prohibits an employee from working for a competitor during a certain time. An employer may use non-compete agreements to stop employees from becoming a competitor. Employers can use non-compete agreements to protect themselves from employees in New York. Independent contractors and consultants often are subject to non-compete agreements after terminating relationships.

Types of non-compete agreements

Non-compete agreements should be fair for both parties. Requiring certain information lessens contract disputes. Information to consider includes the date the agreement begins, the date the agreement ends and the reason for creating the agreement. The agreement should list the employee compensation for agreeing to the terms. Most non-compete agreements limit employment for a certain amount of time.

How do non-compete agreements work?

The legality of non-compete agreements varies from case to case. As long as an agreement has reasonable limitations, they’re usually legally binding. The contracts should include realistic regions where employees can’t work. Some states disregard non-compete agreements, but others allow them in specific industries. The sales industry may have non-compete agreements, so employees don’t become competitors. The software industry may have non-compete agreements, so employees don’t take secrets.

Pros and cons of non-compete agreements

There are pros to non-compete agreements. A non-compete agreement can protect a company’s trade secrets. The contract can prevent employees from giving secret information to a competitor. A non-compete agreement may reduce employee turnover. Businesses that use those contracts may attract workers who don’t have a desire to change jobs. Using non-compete agreements may incentivize employers to provide costly training. Employers may offer training if there are lower chances of employees leaving.

There are cons to non-compete agreements. A non-compete agreement may give workers less bargaining power. Many employees who sign non-compete agreements have little leverage for better opportunities. After a non-compete agreement, employees may leave the field. Top talent may leave the industry permanently.