Trade secrets like recipes, formulas, and technology are used by most companies today in order to make their business unique. They are needed in order for a company to gather more clients and have more financial resources.
As an employer, it is your job to protect the company's trade secrets. You should make sure that an employee who is provided with confidential information will not reveal it to outside parties or use it for his own advantage once he leaves the company. These goals may be accomplished by making a non-compete agreement.
It may be included as a part of the employment contract or may be considered as a different document which will be signed before an individual starts working in the company. You should ask him to sign it prior to his actual employment, though it will only be effective when his employment contract ends or after he resigns or was terminated.
However, the court may disprove this agreement if it limits the former worker's right to work and earn money. In general, it will be only seen as valid if these three factors are present:
The employee signed it in exchange of benefits- If he signed the agreement before he started working in the company, his employment will be seen as a proper consideration for his promise of non-competition.
However, if you asked the employee to sign the agreement while he is already working in the company, his employment will not be seen as proper consideration for such promise. If this is the case, he should be provided with other employment benefits in exchange for it.
- The agreement is reasonable in time, geography, and scope- The court will look at the effects of the agreement on your employee and the need to provide adequate protection to your business when deciding if it will be enforced.
A non-compete agreement should be reasonable in terms of scope and duration. Its reasonableness will depend on the facts included in the case. If it was made to protect vital information, it should only be applicable during the time when such information is still valuable.
In terms of geography, the agreement should only cover areas where your business is also conducted.
If the agreement is too broad, the court may narrow its duration and scope before it allows its enforcement. The court may also consider it void if it already violates the right of your employees.
- You are trying to protect your business's interests- You should be able to prove that you have asked the employee to sign the non-compete agreement because you need to take necessary measures just to protect the company's trade secret. In addition, you should also show that this trade secret is needed for your company's successful business operations.
If you have more questions about non-compete agreements, do not hesitate to consult a Los Angeles employment attorney.