When a non-compete clause is included in an employment agreement, it is designed to protect the employer’s business interest. Employees who occupy positions that enable them to access sensitive information, such as trade secrets may be required to sign a non-compete agreement prior to accepting the position. Being employed with a particular employer may provide the employee an opportunity to gain unique or extraordinary knowledge and skills. In this instance, an employer may also require the employee to sign a non-compete agreement.
Duty of Loyalty
While the employee maintains employment with the employer, the non-compete clause may stipulate that the employee may not engage in any activities that directly or indirectly compete with the employer’s business. While performing his job duties, the employee may not disclose the employer’s confidential information or trade secrets. The duty of loyalty terminates when the employment relationship ends. However, the employee must continue to keep confidential the employer’s confidential information, trade secrets and business opportunities and restrain from disclosing this information to third parties.
Solicitation of Employee
During employment with the company and following termination of employment, the employee may not solicit current employees of the company and, in some cases, former employees for the purpose of hiring or other acts that compete with the employer’s business interest. The non-compete clause may also require that the employee refrain from soliciting employees for a certain period of time. For example, the employee agrees to not engage in business opportunities or hire current employees for two years following the termination of the employment relationship. This requirement may also extend to the employer’s customers, whereby the employee may not solicit the employer’s customers to promote a business for a specific time frame.
Employment with Competitors
After the employment relationship is terminated, the non-compete clause may require the employee to not obtain employment for a period of time with competitor businesses. The agreement may also include a geographic restriction. For instance, the employee may not obtain employment with competitors within the same state or within any state within a certain number of miles.
Ownership Interest in Property
The non-compete agreement may stipulate that the employee may not claim any right or ownership interest in any of the employer’s tangible or intangible property. Intangible property can include such things as the employer’s trade name, patent and copyrighted information. The employee may also be required to return property that the employee has possession of after his employment ends.
If the employer determines that an employee or former employee has violated a non-compete agreement, the employer may seek remedies in court for any lawful provisions that are necessary to protect the employer’s business interest and goodwill.
Marie Huntington has been a legal and business writer since 2002 with articles appearing on various websites. She also provides travel-related content online and holds a Juris Doctor from Thomas Cooley Law School.