Noncompete agreements: Only as effective as they are enforceable

 Noncompete agreements are hard to enforce. Many courts perceive them as attempts to limit an individual's ability to obtain employment--therefore, most courts will insist that a noncompete agreement be reasonably limited in geographic scope and duration. To ensure that your noncompete clause or agreement is enforceable:

• Have your attorney write the agreement. If you ever have to enforce this document, it will be closely scrutinized by the courts.
• Make sure it follows your state's law. Many states limit enforcement of noncompete agreements. Be sure to research applicable state law before drafting the document.
• Relate the restrictions to what the company seeks to protect. If the time and geographic restrictions are too long or too broad, the agreement most likely will not be enforced.

Give something in exchange. Sufficient consideration (compensation) for an employee signing the agreement is necessary to make the agreement stick. If the agreement is part of the hiring process, giving the employee the job is sufficient consideration. If the agreement is signed later on, the promise of a raise or a promotion is probably sufficient. Have it drawn as narrowly as possible. Define the company's protectable interest. Be specific in terms of equipment, information, technology, strategy, sales prospects, and other pertinent information that you consider proprietary.

Treat your trade secrets confidentially. If you want to convince a court that your trade information must be kept confidential, treat is as such in your business. Keep the information in a secure place, giving employees access on a need-to-know basis only.

Do not selectively use or enforce such agreements. Make all similarly situated employees sign them. All employees should be made to comply with any agreements that they sign.

Check if new hires have signed noncompetes. Consider having new employees sign a statement that says they are not bound by a conflicting noncompete contract with another company.

Noncompetes are corporate prenuptial agreements
Noncompete agreements are contracts that attempt to restrict--for a certain length of time--an employee's ability to leave his or her employer and perform a similar job for a competitor or set up a competing business. Noncompetes are used by many companies to encourage key employees to remain with the company and to prevent them from competing with it after they leave.

Who should sign noncompete agreements?
Noncompete agreements are not necessary for all employees. A receptionist may not have access to any sensitive information, so you shouldn't ask him or her to sign one. Employees who should be asked to sign noncompete agreements are:

• Employees who are involved in research or product-development work.
• Employees who do creative work related to trade names, advertising, broadcasting, and sales-promotion material.
• Sales/service employees who suggest solutions to customer complaints.
• Administrative employees who process details relating to any experimental, inventive, or creative work.
• Employees who service machines, equipment and similar products made or sold by your organization.
• Manufacturing, maintenance, and production department heads who have substantial supervisory authority over the manufacture or production of machines and products made by your organization.
• Employees who have enough information about your company to be able to start up a similar competing business.