Non Compete Clause for Employment Contract
When starting a new job, it`s common for employers to include a non-compete clause in a contract. This type of clause is designed to protect a company from its employees leaving and starting a competing business or working for a competitor. A non-compete clause typically prohibits an employee from working in a similar field or industry for a certain time period after leaving the company.
The legality of non-compete clauses varies by state, and some states have banned them altogether. However, in states where non-compete clauses are legal, there are limits on what they can and cannot include. For example, the time period for the non-compete must be reasonable, usually between six months to two years. Additionally, the geographic scope of the non-compete must be reasonable and based on the company`s actual market areas.
The purpose behind a non-compete clause is to protect a company`s trade secrets, customer lists, and intellectual property. These are all valuable assets that an employee could take with them if they were to leave and use them to compete with the company. A non-compete clause can also prevent an employee from poaching coworkers or clients from the company, which could harm its business.
Employers use non-compete clauses to limit an employee`s ability to leave their company and work for a competitor, but they can have negative consequences for employees. For example, if an employee lives in a small town and the non-compete prohibits them from working in their industry for two years in a two hundred mile radius, they may be unable to find work and support themselves and their family. Additionally, if an employee is terminated or laid off, the non-compete clause could prevent them from finding work in their field anywhere in the country.
If you are considering signing an employment contract that includes a non-compete clause, it`s essential to understand the terms of the agreement. You should carefully review the time period, geographic scope, and industry restrictions to ensure they are reasonable and fair. Additionally, it`s essential to understand the consequences of violating the non-compete clause, such as legal action or a monetary penalty.
In conclusion, non-compete clauses are legal and useful tools for employers to protect their business. However, employees must be aware of the restrictions they place on their future job opportunities. Before signing an employment contract that includes a non-compete clause, employees should make sure they fully understand the terms of the agreement and seek legal counsel if needed.