In a competitive business landscape, protecting your company's assets and intellectual property is paramount. Non-Compete Agreements remain a useful tool in this endeavor.
The Federal Trade Commission (FTC) issued a rule that has been publicized as banning non-competes. Litigation ensued. A Texas court found that the FTC exceeded its authority and blocked the rule. The FTC has appealed, and its brief is due in early 2025. There is no Final Word at the moment.
So what are you to do?
Use non-compete agreements sparingly, and only with those employees having access to, or knowledge of, the company’s trade secrets, or knowledge of the sale of a business, or to senior executives with knowledge specific to the company’s operation.
Do not be overzealous in time or geography requirements. Let your people make a living when they leave you, so long as they do not do so by misappropriating your intellectual property.
Understanding Non-Competes
Non-compete agreements are legal contracts that restrict certain employees for a limited time from entering into competition with an employer after the employment period is over.
The value of enforceable non-compete agreements is they prevent competitors from using your competitively sensitive information like your technical data and your business trade secrets. Executives and Lead Engineers who sign these agreements are deterred from downloading your formulas, technical specifications, and client lists before they leave for a competitor or open up their own shop. And if the ex-employee does so in the face of such an agreement, you have breach of contract as additional legal theory in a Complaint when you seek remedies against the ex-employee and/or their new employer.
Key Elements of Enforceable Non-Compete Agreements
Reasonable Geographic Scope and Duration: To be enforceable, non-compete agreements must be reasonable in terms of geographic scope and the duration over which they are applied. They should protect legitimate business interests without being overly restrictive on employees’ future employment opportunities.
Protection of Legitimate Business Interests: The primary purpose of these agreements is to protect company assets like trade secrets, proprietary technical information, and certain confidential business information. Clearly defining what is protected is crucial for these agreements to be upheld in court. It is important not to overreach here. The goal is not to prevent gainful employment of ex-employees.
Consideration: For a non-compete agreement to be valid, there must be clear consideration given to the employee. This could be a job offer, a promotion, or other benefits provided in exchange for the employee's agreement to the terms.
Protect Your Business with Panagos Kennedy PLLC
With experience in drafting and evaluating non-compete agreements, Panagos Kennedy PLLC can assist your HR team in updating its forms and advising on terms and conditions that would reasonably be expected to survive an attack in the courts.
For businesses in Troy, protecting your intellectual property and business information is a necessity. Contact Panagos Kennedy PLLC to ensure your non-compete agreements are enforceable. Visit our website for more information.
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