Last Updated on December 9, 2022 by Anda Malescu
Today, companies in the United States use employee non-compete agreements to protect sensitive information, trade secrets, any technology, intellectual property and other proprietary information. Here we discuss what non-compete agreements are, how they operate in employment context, and what they mean for an employee in the United States.
In employment context, a non-compete agreement is a contract between an employer and an employee in which the employee agrees not to compete with the former employer by accepting employment for a competitor, working with a competitor or starting a new business that competes with that of the former employer. An employee non-compete agreement is usually entered into when an employee is set to learn trade secrets from the employer and could later become valuable to a competitor when the employee decides to leave the company.
In simple terms, an employee non-compete agreement protects the employer and the company by legally blocking the employee exiting the firm from sharing information learned on the job. As a result, an employee non-compete agreement restricts the employee’s ability to disclose any trade secrets or sensitive information for a period of time after he or she leaves the company or within a particular geographic area. Typically, a non-compete agreement between an employer and an employee is entered into at the start of employment or before the employee accepts the job and during a time when the employee thinks least about leaving the employer.
An employee non-compete agreement is usually part of a larger employment agreement or it appears as a non-compete clause. In addition, an employee non-compete agreement typically includes a non-disclose clause. This agreement is subject to state law and includes details about the jurisdiction under which the employee non-compete agreement is enforced.
An employee non-compete agreement varies from one company to another since they are prepared specifically for each employer and the laws of the states in which the employer operates varies with respect to recognition and enforcement of these agreements.
However, some of the typical provisions include:
- Duration. The duration of an employee non-compete agreement ranges from 6 months top two years or less and starts upon termination of employment. The employing company must set a reasonable timeframe restriction and cannot permanently prevent an employee from furthering their careers. A court likely will not enforce a long-term non-compete restriction in an employment context.
- The employer (company) must list the specific work or activities that they restrict the employee from doing.
- Geographic area. The geographic area covers the area where the company does business and an employee non-compete agreement imposes restriction on the employee with respect to a radius around the headquarter or metropolitan area or the like. For example, an employee non-compete agreement may prohibit an employee to compete in Miami-Dade County or only in the City of Miami, or in the City of Miami and a 25-mile radius around the City of Miami.
- In most cases, an employee non-compete agreement does not provide the compensation that the employer receives if the employee violates the agreement.
- Where the non-compete agreement blocks an employee from working with certain competitors, the agreement must define the type of businesses or industries that compete with the employer.
When presented with an employee non-compete agreement, employees should seek advice from an attorney or otherwise negotiate with the company limitations. Contact us, your business lawyer in Florida, to help you with your employee non-compete agreement or book a consultation.
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