• Home
  • Our Services and Solutions
    • Total Rewards Consulting
    • Web-Based Talent Management with Flare®
    • Finders Keepers™ Employee Retention
    • Custom Total Compensation Surveys
  • Resource Library
    • Astronology® Blog
    • Subscribe to Astronology®!
    • Getting to Know Flare® Videos
    • Presentations
  • News & Events
    • Announcements
    • Astron Road Show
  • About Us
    • About Astron
    • Corporate Team
    • Testimonials
    • Our Clients
    • Speaking Opportunities
  • Contact

ASTRONOLOGY®

Non Competes: The Good, The Bad and The Ugly

May 12, 2015 by Cassandra Carver Leave a Comment

By guest author: pmphrblog for Portnoy, Messinger, Pearl & Associates, Inc. Tri-State area human resources and labor relations consulting firm.

Decorative Image - someone signing an employment agreement

In today’s information economy, the protection of proprietary information is becoming even more essential. Employers, in increasing numbers, are requiring employees to sign so called “covenants not to compete,” or non-compete agreements. A covenant not to compete is an agreement that the employee will not work for a competitor for a specified period of time. In addition to confidentiality agreements, this is a powerful tool to prevent employees from misappropriating proprietary information such as trade secrets, or client information and supplying it to competitors. Such agreements also prevent employees from poaching clients and starting their own firms.

Who should sign non-compete agreements?

Employees who pose the greatest risk to theft of proprietary information should be required to sign these agreements. Thus, courts are far more likely to enforce a non-compete against an engineer or an accountant, than a janitor.

There are numerous pros and cons of requiring employees to sign non-compete agreements. In some cases where the risk to proprietary information is high, they are a necessity. In other situations these factors should be weighed to determine if one is necessary.

Some advantages of non-competes are that they:

  • Protect trade secrets and other confidential information,
  • Can help prevent high performing employees from leaving and working for competitors,
  • Prevent the loss of clients or key customers when an employee leaves, and
  • Have the effect of improving retention.

On the other hand requiring employees to sign a non-compete can create tension between employees and employers, and may induce some employees to quit immediately. It may also be more difficult to attract talent, as incoming employees may be reluctant to sign a non-compete. Moreover, such agreements may be found unenforceable in court. Even if the agreement is enforceable, the costs of enforcement can be prohibitive. Enforcing such agreements often requires the retention of an attorney and the initiation of a lawsuit which can cost an organization thousands of dollars in legal fees.

Covenants not to compete must be reasonable in terms of the following three areas:

1. Duration: Courts will generally not enforce a non-compete that has a duration longer than two years. The shorter the duration, the more likely courts will find the agreement reasonable.

2. Geographic Scope: It becomes more complicated when deciding the geographic scope. The scope must be limited to the area where the business primarily operates. For example, an organization that does most of its business in New York, New Jersey, and Connecticut must limit its non-compete to those states. Most nationwide non-compete agreements are unenforceable except for high level employees at large corporations.

3. Industry: Non-competes must be limited to the particular industry of the employer. For example, a company that produces semi-conductors cannot prevent an employee from working in a restaurant or other unrelated industry.

Overall these agreements must be drafted in a way that satisfies their purpose of protecting proprietary information, while not being excessively burdensome on the employee. These agreements are not always looked favorably upon by the courts.  The courts have placed limits on the scope and reach of non-compete agreements. Thus, employers must weigh these advantages and disadvantages when deciding whether to require employees to sign a non-compete. All agreements should be reviewed by counsel before asking an employee to sign it.

This article is intended for general information only and should not be construed as legal advice.

For more information on labor relations please visit us at:

http://www.pmphr.com/

About Portnoy, Messinger, Pearl and Associates:

Portnoy, Messinger, Pearl and Associates, Inc. (PMP), the oldest labor relations consulting firm representing management on Long Island, was founded in 1964 by former union organizer and worker’s rights advocate, Murray W. Portnoy. Initially, Murray offered human resource consulting and union contract negotiating services to a handful of clients. Today PMP has a full staff of experienced and talented human resources and labor relations consultants, labor and employment attorneys, and administrative personnel. Murray Portnoy’s values and vision remain at the core of PMP’s mission and principles.

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
Linkedin

Filed Under: Legal Compliance Tagged With: Non-Compete Contracts

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Subscribe!

Categories

  • Benefits
  • Communication
  • Compensation
    • Budget Planning
    • Compensation 101
    • Compensation 102
    • Compensation 103
    • Compensation 104
    • Compensation 105
    • Compensation 106
  • Employee Relations
    • Workplace Environment
  • Employee Retention
  • FLSA
  • General
  • HR Strategy
  • HR Technology
  • Incentive Pay Plans
  • Job Descriptions
  • Job Evaluation
  • Legal Compliance
  • Legislation
  • Merit Pay
  • New Year Projections
  • Performance Management
  • Recruitment
  • Retirement
  • Talent
  • Training
  • Uncategorized

Recent Posts

  • Small Business Employee Management: 5 Tips for Success
  • Work/Life Balance in 2023
  • Three Ideas for Improving Your Organization’s Wellness Benefits in 2023

Recent Comments

  • CLETUS OKOH on Employee Loyalty: The Secret Sauce and Tips Your Organization Needs
  • Luke Smith on Hiring a Compensation Consultant: 7 Steps for Nonprofits
  • Luke Smith on Executive Compensation: Taking Charge of Your Organization’s Approach

Archives

Back to Top
Our Focus Is on YOU!

Programs tailored to your needs. Software that’s highly customizable and modular.
Compensation consulting services priced affordably and with no hidden costs.

Want to learn more?

Let's chat

Astron Solutions
505 8th Avenue
Suite 2200
New York, NY 10018

Phone: 800.520.3889
Fax: 212.792.8256




  • About Us
  • Consulting
  • Web Based Talent Management
  • Employee Retention
  • Contact Us
  • Privacy
  • Disclaimer
  • Website Design by Vertical Rail
  • ©2010-2023 Astron Solutions