When an employee leaves a company, his employer often requires him to sign a covenant which is a non-compete agreement or contains a non-competitive clause. This contract basically means the employee is not allowed to apply for a position that makes him a direct competitor to his former company for a certain period of time.

The employer has the prerogative whether he will require an employee to sign a non-competitive clause or not during termination or resignation. However, there are several factors that a company owner should consider if he intends to take such actions:

  • The employer should still take into consideration the welfare of his former employee. In most cases, employers should provide certain benefits for employees after signing their not to compete agreement. Such benefits may include severance pay, insurance benefits, or a brand new mobile phone.
  • The contract's purpose should be to protect a valid business interest. Some issues that are related to business interest include customer relationships and confidential information. As long as the contract protects these things, it is a legal agreement.
  • Customer relationships – If an employee has developed a good relationship with his customers, he should not use such factors to persuade them to support his new company.
  • Confidential information – Any valuable company information that an employee has or knows should not be disclosed, especially to competitors. If this happens, the employer has the right to sue him for damages.
  • The conditions of the agreement should be reasonable for the employee. The scope and duration of the agreement should be reasonable enough for the employee. As long as he follows the contract's conditions, that may do it. Besides, he still needs to land a new job and earn money.

If you are an employer who wants to utilize the covenant not to compete agreement as a way to protect your company's interests, make sure you take note of these things. If the employee finds out that your reasons for making him sign the contract were invalid, he may file charges against you. You would not want to face something like a lawsuit, would you?

Covenant not to compete agreements are important to protect a business' interests in order to gain more profit. Even if an employer has that kind of purpose for his non-competitive clause, he should be able to consider the other party as well. To know more information about non-competition contracts, just seek legal advice from a Los Angeles labor attorney.