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Legal Requirements for Non-Competition Agreement

By Edited Jul 26, 2016 0 0

Employees who begin or end their employment relationship with a company may be asked to sign a non-competition agreement. Non-competition agreement includes non-disclosure of confidential matters that serves as an advantage of a company over the others.

Confidential matters may include trade secrets, client information, and data from the

services offered that may affect the profitability or security of the company.

Though the court acknowledges this right for security, employees are also entitled to protect their right to earn. The court reviews non-competition agreement and evaluates the fairness for both parties.

Non-competition agreement may limit the disclosure of confidential information, as well as consider the need of employees to be employed using his or her skill.

The following are the legal requirements:

1. The non-compete agreement must be fully reviewed and considered both by the

employer and employee.

2. It must be for protecting a reasonable business interest.

3. It must legitimate consideration for geography, scope, and time.

The employee must also receive a reasonable monetary compensation for such agreement. The employee may receive additional pay if the non-compete agreement is made after signing the employment contract. The employer may not be obliged to provide additional pay, if the non-compete agreement is made before signing the employment contract.

The employer may secure the goodwill that he or she has established among the customers. Employees may be asked to sign a non-compete agreement to prevent potential risk and threat to that goodwill.

However, employer needs to consider the needs and status of the employee. Factors such as skill, residence location, and number of dependents should be considered when restricting the employee from being employed in similar companies.

The court usually does not allow restricting the employee to work in a location where the employer has no existing business in there.

The court has the right to modify the non-competition agreement or reject it if the contract proves to have a malicious intent to hinder a former employee to be employed with a competitor.

Other consideration for non-competition agreement:

1. The agreement should be reasonable in duration and scope.

2. Facts stated as basis for the agreement should be reasonable.

3. The protected information is limited to its value.

4. Geographical area should consider the proximity from the employee's residence.

5. The quality and quantity of the service or information of the company should be considered against the severity of the restriction.

6. The agreement does not abuse the employee's right to earn a living.

If you are one of the employees involved in a lay-off or termination, and you feel that the non-compete agreement is severe enough that it has violated your right to earn a living; you may file a lawsuit. Consult a Civil Rights lawyer in Los Angeles and assert your rights today.



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