All too often, employers try to use non-compete agreements for all of their employees, which is typically not a reasonable thing to do. The reality is that many front-line or hourly workers do not have access to the important information about your business that they could ever use in competition against your business. For instance, if you run a retail store, you generally should not require the cashiers that you hire to enter into non-compete agreements. On the other hand, with respect to your store manager, who presumably has access to your sales strategies and the inner workings of your business, you very well may benefit from a non-compete agreement.
What should be included in a non-compete agreement?
If you have an employee who has managerial powers, a special skill set, or has supervisory authority at your business, a non-compete agreement may be ideal to protect your business. However, the non-compete agreement still must be reasonable in nature. Any time and distance limitations in a non-compete agreement must not be greater than necessary to protect your business. Therefore, a blanket prohibition for the next 20 years against working in a similar industry in the Virginia area as a whole probably would not be reasonable, which could make your non-compete agreement unenforceable. This can lead to a legal dispute and the need for a Virginia litigation lawyer.
Are all non-compete agreements enforceable?
Federal and state courts have not always been consistent in delineating the factors necessary to make a non-compete agreement enforceable. For example, some state courts have applied a bright-line “two-year rule” to non-compete agreements, finding that there must be at least two years of continuous employment in order to justify the enforceability of a non-compete agreement. Other courts, however, have explicitly rejected the “two-year rule” in favor of a totality of the circumstances approach based on the facts of each particular case.
Until there is clarification on what is necessary to ensure that non-compete agreements are enforceable, employers should stick to straightforward non-compete agreements for appropriate employees that are unreasonably confining in terms of duration or geographical location.
Employers often use non-compete agreements to preserve the businesses that they have worked so hard to build. The idea behind a non-compete agreement is to prevent your employees from leaving their positions and taking what they have learned from you and using it against you by directly competing with your business. The enforceability of non-compete agreements, however, depends on how they are drafted and whether or not they are reasonable in nature, otherwise, your company could find yourself in the need of a business dispute lawyer in Virginia.
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Non-compete agreements are a common issue for all types of businesses, and the uncertainty of state law as to their enforceability makes the use of non-compete agreements all the more difficult for business owners. If you would like more information on non-compete agreements or you are facing a legal issue with a former employer and their non-compete agreement, contact Dale Jensen, PLC. to schedule a consultation with a skilled Virginia litigation lawyer.