Employers generally negotiate contracts with workers to protect their organizations. Frequently, the main focus is to limit liability. When employees know what is expected of them and what the company intends to provide them with, there is less likelihood of conflict arising later in the employment arrangement.
Businesses can also integrate clauses that help protect the company after the employment arrangement ends. Restrictive covenants can impose limitations on the future economic activity of employees. Non-compete agreements, in particular, are popular additions to modern employment contracts. Businesses with valuable trade secrets ranging from proprietary production processes, unique recipes and established client lists can protect those trade secrets with non-compete agreements.
How non-compete agreements can help
Employment contracts that include non-compete agreements can protect employers and their trade secrets by preventing workers from immediately leaving to monetize those trade secrets. Typically, restrictive covenants have to include terms that limit their applicability. They may remain in effect for several years and within a specific geographic area.
Provided that the agreement includes appropriate restrictions and that the contract itself is valid, employers can hold former employees accountable for unfairly competing with the company. Non-compete agreements prevent employees from taking jobs with direct local competitors. They also prevent them from opening their own companies in the same economic niche.
Until the non-compete agreement eventually expires, the employee must look for alternate means of supporting themselves rather than the industry in which they were previously employed. Employees subject to non-compete agreements cannot use a company’s customer list or other trade secrets for personal enrichment.
If they disclose non-public information to a competitor or use the information to start a business that competes with a former employer, then the former employer can take legal action. Typically, non-compete agreements have penalty clauses integrated into them that impose financial consequences for violation of the contract.
If an employer can show that a former employee violated their non-compete agreement, they can ask the courts to enforce the penalty clause. They may also be able to request economic damages in addition to the contractual penalties. A judge can also issue an injunction that can prevent future infringement.
Adding non-compete agreements to employment contracts and negotiating terms for them when promoting a current staff can help companies protect their trade secrets. Organizations with robust contracts have less exposure and more options when faced with the misuse or disclosure of trade secrets.