A non-compete agreement is a type of agreement contract created by employers, which prohibits employees from being employed by competitors or similar companies. Prior to working for a company, an individual may be required to sign a non-compete agreement.
This agreement will usually outline how long the agreement lasts and to what geographical location the agreement applies. After an individual signs a non-compete agreement, he/she will not be permitted to work for competitors of the company.
There has been an extensive amount of debate surrounding non-compete agreements. For example, it prohibits an individual from seeking employment in a field that he/she has experience in, thereby significantly limiting his/her employment opportunities. These agreements are also very difficult to enforce.
An employer would need to know where his/her past employees were seeking employment, and subsequently take the legal action necessary to prevent them from being employed in these locations.
Despite the many concerns regarding non-compete agreements and the flaws associated with this type of contract, there are practical reasons for using them. For example, some companies maintain confidential client lists to which employees have access. In addition to these customer lists, employees also have access to marketing strategies, new products, and additional confidential information. If a former employee chooses to acquire employment with a competitor, he/she may reveal this information, thereby adversely impacting a company.
A non-compete agreement is considered to be a legally binding contract, as long as the conditions outlined within the agreement are reasonable.