In many industries, businesses find themselves competing for the top employees, and it has become increasingly common in recent years for employers to ask or require staff members to sign non-compete agreements. By signing these documents, an employee agrees not to work for a direct competitor for a specified amount of time after leaving the organization in question. Non-compete agreements can help prevent loss of revenue, in addition to protecting your company’s confidential information and trade secrets.
Before asking your employees to sign a non-compete agreement, however, you should consider the following:
Restrictions related to non-compete agreements are governed by state or territorial laws rather than federal laws. In the U.S. Virgin Islands, non-compete employment contracts may be deemed legally void if the restraint is found to be greater than necessary to safeguard the company’s business interest, or if the company’s need is outweighed by the hardship it creates for the new employee. Recently, a company that was acquiring a Virgin Islands business was requiring that our client, the local business owner, execute a worldwide non-compete. We advised against it as it was “over reaching” and greater than necessary to safeguard the acquiring company’s business interest.
Non-compete agreements tend to be more necessary for industries that rely on sales professionals for leads or to handle patented technologies. If you are not sure whether your company needs to use non-compete agreements, consider researching if your direct competitors require their employees to sign them.
If you do decide to use a non-compete agreement, it’s best to make sure that it contains similar terms to other agreements used within your industry. By doing so, you’ll help ensure that a promising job candidate doesn’t back out because your non-compete agreement is more restrictive than a competitor’s.
It’s important for non-competes to be fair, with reasonable limitations regarding time limits and geographical areas. An unreasonably strict non-compete agreement will be difficult to enforce, potentially requiring the employer to address with frequent violations — and even lawsuits. In addition, a non-compete should not prevent an employee from being able to make a living after leaving your organization.
It’s important to discuss non-compete agreements during the hiring process. At the very least, it should be communicated to candidates as soon as mutual interest has been expressed, but it may also be a good idea to consider making it a part of your job descriptions. By doing this, you’ll be able to ensure that no job deal falls through at the last minute because the candidate is surprised by the non-compete requirements.
Non-compete agreements are a common part of modern business practices, but they might not always be appropriate. Consider these factors and consult an employment attorney for further guidance specific to your business or organization.
BoltNagi is a well-established and widely respected employment law firm serving businesses and organizations throughout the U.S. Virgin Islands.