Non-compete agreements are necessary in many industries, from toys to fashion to software and more. When employees have unique skills and talents and/or access to valuable information and processes, employers don’t want them leaving their organization and going straight to a competitor.
While sharing intellectual property like trade secrets could put them in legal jeopardy, they could disclose marketing and pricing strategies and a host of other information – not to mention use their skills – to their former employer’s disadvantage. That’s why employers commonly include non-compete clauses in their contracts.
The federal government is looking at limiting these agreements
Unfortunately, too many businesses misuse these agreements. They include them in employment agreements for hourly workers (for example, in the fast-food industry) who don’t have access to any kind of protected information. This keeps people from getting jobs they need to support their families after they leave.
The federal government is looking at taking steps to prohibit or at least limit the use of non-compete agreements for lower-wage workers. The Federal Trade Commission (FTC) has proposed a new rule to that effect, citing the overuse of the agreements as especially harmful to hourly workers and the economy as a whole.
Non-compete agreements can be challenged
In light of this greater scrutiny on non-compete agreements, employees are looking more closely at theirs. Often, people don’t even realize they signed one until they leave the company and their former employer tries to enforce it.
Of course, a non-compete provision can’t be so restrictive that it prevents someone from earning a living after they leave their employer. If it’s too broad or has unreasonable terms (in length of time or geographic area, for example), it can often be successfully challenged. However, businesses have every right to show why their terms are reasonable and necessary.
If your business is facing a challenge to a former employee’s non-compete agreement, mediation can be a cost-effective and efficient way to settle it. If the employee claims the terms are too stringent or too broad and are preventing them from taking job offers, mediation is a good way to negotiate terms that will work for both of you. With experienced legal guidance, you can better determine the best way to go about settling the matter.