When the employer incorporates a non-compete contract into an employment contract, it undertakes to hire (or pay the employee to sign the non-competition clause) and the employee undertakes not to engage in competitive business activities during or after the termination of the employment relationship with the company. Non-compete agreements generally limit the former employee to managing competing operations only within a given geographic location and for a limited time. A non-competition agreement is a restriction whose purpose is to avoid the use of information or knowledge acquired or developed during the employment or following the conclusion of the contract concerned, which would facilitate or exploit competition or would have the effect of making the signatory a competitor. As I said, the clause is valid as soon as certain limits are met. If an outgoing worker violates an enforceable non-compete agreement, the employer has the option of seeking litigation against him. However, not all states impose non-competition bans in the same way, so it is important to check state laws first. «A PIIA can protect the company from the fact that an employee steals its proprietary information, including customer lists, business partner contact information and other valuable or confidential information provided by the employer,» Fontanesi said. «Other alternatives are initiative agreements or agreements that do not recruit or hire staff.» «If an employer wants an employee to sign a non-compete clause or PIIA after having already started work, they should consider offering some form of incentive or other consideration at the signing of the agreement in order to increase the likelihood that it will be applicable,» Fontanesi said. In addition to certain employment contracts, non-compete obligations are often caught in situations where the seller transfers all or a substantial portion of the seller`s activity to a buyer. Our Chicago lawyers know that non-competition prohibitions resulting from the sale of businesses are often easier to enforce than those contained in an employment contract. «Entrepreneurs work very hard and spend a lot of money to develop their products, create their customers, build partnerships, recruit talent/collaborators and develop their proprietary information or intellectual property,» Dani Fontanesi, founder and managing partner of Fontanesi Legal Consulting, told business.com. «They want to know that when they hire an employee, that employee can`t just steal their customers, abuse their proprietary information and create a competing business without doing the hard work to legitimately build a business from there. Non-competition prohibitions are designed to protect businesses from this kind of behaviour. Non-competition obligations are very specific to the state.
Fontanesi said some states may even impose sanctions on companies that require an employee to sign a non-compete clause that does not comply with the laws of that state. Therefore, you must be well informed of the government laws that govern your non-compete agreement. Employers should consult a lawyer before their employees sign a non-compete clause. That is what happened in a recent decision in a federal court in Detroit. Judge Terrence G. Berg, in Innovation Ventures, LLC v Custom Nutrition Laboratories, LLC, et al., 2020 WL 1531700 (March 31, 2020), was asked to enforce a 20-year non-compete agreement between the parties on the basis of a settlement agreement with an earlier dispute.