Non-Compete Agreements: Practical Insights into the Importance and Functions

Many North Carolina businesses lose their valued clients when their existing employees quit. This is because they do not safeguard against competition from former employees. As a result, when an employee quits, he also takes away the clients he’s been handling.

A non-compete agreement can come in very handy for businesses that face the risk of customer poaching from a former employee. However, business owners may require professional help to draft a solid non-compete agreement. Therefore, you should always hire experts for the job, like Charlotte non-competition agreement attorney.

Understanding the objectives of a non-compete agreement

A non-compete agreement is an effective tool incorporated as a clause in a contract to prohibit an employee from competing with the employer after the employee leaves the job. The agreement also prevents former employees from revealing sensitive and proprietary information to other competitors during or after employment.

Most of the time, a non-compete agreement specifies the amount of time for which an employee is barred from working with a competitor or starting a business of their own in the same category as the employer. Other than employees, a non-compete agreement may also be applied to contractors and consultants.

Components of a non-compete agreement

While non-compete agreements are not standardized, they all incorporate similar elements that safeguard businesses against competition from former employees. Here are some of the most prominent ones of them:-

  • Duration is the key element of a non-compete agreement. Employers incorporate a time frame within which the employees are prohibited from entering the same business. However, the duration cannot be excessively long.
  • Some non-compete agreements can prohibit employees from joining or starting a similar business in specific areas.
  • Non-compete agreements also specify the type of service or work an employee is prohibited from offering, which may also include techniques, information, procedures, etc.
  • The agreement should be able to define competition and give a general idea of the industry and businesses that employees cannot indulge in after leaving the job.
  • The non-compete agreement must define the damages an employee will have to incur in case of breach.

Benefits of a non-compete agreement

A non-compete agreement can have several benefits for businesses, especially those dealing in the service sector. However, the most prominent ones are listed as under:-

  • It can protect employers from the risk of employees leaving with sensitive business information and valuable clients.
  • It can protect the original ideas and innovation from spreading out.
  • It allows businesses to employ individuals who are looking for a long-term commitment.
  • It can substantially reduce employee turnover or exit rate.

A non-compete agreement should be fair to both employer and employee, regardless of the benefits and clauses mentioned in it.

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