To determine if you need a non-compete agreement, you must first understand what exactly a non-compete is and how it is used in a business setting.
A non-compete agreement is a contract that prevents someone from engaging with competitors for an allotted period of time within a geographic area. More broadly, it is a contract that holds someone to competitive restrictions, including non-solicit, non-recruit, non-disclosure, and confidentiality agreements.
Historically, there were specific types of employees who were asked to sign these contracts, including corporate executives, creative personnel, research scientists, product developers, top sales representatives, and so forth. However, now, the pool of viable employees has expanded throughout offices, simply to people who have access to sensitive and protectable information.
As discussed in a previous blog post, in the state of Arizona, judges have found a non-compete agreement to be enforceable when it has a legitimate business purpose, limited time duration, reasonable restricted area, and narrow focus on the individual’s previous job duties.
Now, why do you need one? Whether you are a small business owner or a corporation, there are many instances in which it would be necessary. Here is a list of reasons why drafting a non-compete agreement is important to the security of your business.
Enhance the Value of Your Company
As your company grows, there is potential for you to sell it later down the road, even if you don’t see that happening at first. To prepare for this possibility, it is important to protect the value of your company by requiring employees to sign restrictive covenants. It is better to complete this sooner rather than later, as potential buyers may fear key employees leaving with private information after a merger or acquisition.
Trade Secret Protection
Trade secrets are valuable assets of information, like patents, that are often the reason non-compete agreements are put in place. Many business owners want the comfort that comes with safeguarding intellectual property, including processes, policies, or blueprints for product manufacture. In these cases, a non-compete agreement could have a provision that keeps said intellectual property a secret and, therefore, prevents employees from using the information.
Strengthen Employee Morale
Perhaps against what some may think, a proper non-compete agreement can actually be a sign of a well-run company that values its employees and its business. It can demonstrate that the company culture is developed enough to understand its values and that it is willing to protect them. Being part of a well-organized and well-run company is very attractive to employees. Also, having a proper non-compete agreement at the new hire stage detours individuals who are not looking for a long-term commitment with the company from even applying, thus saving the company the hassle of hiring people who intend to leave quickly.
Contact Counxel Legal Firm
We cannot wait to help you with any non-compete-related questions. Contact us at (480) 744-6621 or at request@counxel.com. Don’t forget to check out the good things that others are saying about the services they received from Timothy Coons on Google.
This article is intended for informational purposes only and does not constitute legal advice for your specific situation. Use of and access to this article does not create an attorney-client relationship between you and Counxel Legal Firm. Please contact request@counxel.com or (480) 744-6621 to request specific information for your situation.
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