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Is the non-compete agreement your employees sign enforceable?

On Behalf of | Jul 19, 2017 | blog

When you run a large and successful company, you need to take steps to protect your trade secrets and other sensitive information. When hiring staff who work in skilled or creative fields, or for those in positions that allow access to sensitive intellectual property, your contract should include a non-compete agreement.

At the most basic level, a non-compete agreement should protect you, as the employer, from your employees using protected information, like trade secrets, for their own profit. Companies spend years and invest a lot of their assets to build up a business that has unique benefits to offer consumers. Relationships and processes can be critical secrets in the oil and gas industries.

Violations of a non-compete agreement could include accepting a job with a competitor in exchange for a client list or chemical formula. If your employee starts his or her own business using the intellectual property, such as secret processes, learned from your company, that could also be considered a violation of a non-compete agreement. Simply continuing to work in the same field should not violate your non-compete agreement. Creating an incredibly strict and unrealistic non-compete agreement could leave your company unprotected. You need an enforceable one.

What can a non-compete agreement include?

Your non-compete agreement could include a nondisclosure agreement, meaning that employees can’t share information about their work with anyone outside of the company. This kind of agreement should protect trade secrets, client lists and other sensitive information from being openly shared or covertly traded for social or financial gain. Some companies take it farther, restricting employees from naming their employer on social media or speaking poorly of your company.

A non-compete agreement can also include restrictions on employment. Typically, these restrictions must last for a reasonable amount of time and should not completely eliminate a worker’s ability to earn a living and provide for his or her family. Your could require that your employees not work for direct competitors or that they not solicit work or sales from clients and companies they worked with while in your employ.

What makes a non-compete agreement less enforceable?

If your non-compete used very broad or vague language, the courts may not find your non-compete agreement to be valid. Generally speaking, any limits on employment or starting a new business should have a specific timeframe. Under Louisiana law, the maximum timeframe an employee can voluntarily waive the right to work in a specific field or industry in a non-compete agreement is two years. Anything beyond that could be a violation of state law and thus, unenforceable.

Similarly, the degree of restriction must be reasonable. It is reasonable for an employer to limit the sharing of knowledge gleaned while in their employment or to limit former employees from working in the same field in parishes where they do business. It is not reasonable to require that former employees work in a completely different field or industry or to state they cannot work within a certain number of miles of your business.

Failing to compensate staff for signing could make a non-compete unenforceable. Staff should receive some kind of compensation for signing a non-compete agreement. This could include getting hired, receiving a pay raise or promotion or it could be other perks and benefits. If your staff is simply expected to sign without any compensation, the non-compete agreement may not be valid.