3 reasons to have your workers sign noncompete agreements

| Apr 28, 2021 | Business Law

The contracts that you have your staff members execute protect your business and the other people you employ. It is crucial for your company’s success that you ensure that your contract addresses all of the most noteworthy liabilities for your business.

Specifically, you may need to have workers sign a noncompete agreement preventing them from unethically using your company’s resources for their own enrichment by starting a competing company or going to work for a competitor. Not every company requires such agreements, but in some circumstances, like the examples below, a business will benefit from limiting how employees might compete with them.

1. You have a unique process or proprietary recipe

Some companies have trade secrets that help them outperform their competitors. A popular cola manufacturer, for example, has notoriously thorough systems in place to prevent anyone from learning the recipe for their flagship soda.

When you are able to make something that your competitors cannot, protecting that secret may necessitate a non-compete agreement that prevents a worker from going to your competitor or using the same recipe or process in their own business.

2. You operate in an industry with no room for competition

Healthy competition from other businesses can motivate your staff and even lead to innovation in how your company does business. However, not every industry can support multiple large businesses. If you work in a niche without room for other local competitors, limiting the ability of a worker who leaves your company to start their own business in the same field could help keep your company solvent.

3. You have grown to a point where you don’t have a personal relationship with workers

When you first start a company and only work with those you know and trust, you may not feel the need to have staff members execute non-compete agreements or contracts that have any sort of restrictive covenants limiting their future rights.

However, when the pool of employees starts to expand, it will be harder for you to familiarize yourself with the ethics and behavior of each individual. You will be at elevated risk for someone you hire coming to the team with the intention of accessing company secrets or client lists in order to set themselves up for professional success.

Thorough employee contracts that you have workers sign when they first start a job or accept a new position can help protect your company from unfair competition or the theft of your trade secrets. If an employee bound by such an agreement violates it, going to court to enforce it could be the only way to protect your business from such a breach.