Should Your Company Demand Employees Sign Non-Competes Or Non-Disclosures?

Non-compete and non-disclosure agreements are features of employment contracts that are meant to protect the employing company. Non-competes usually state that the employee will not work for another company in a particular capacity or field for a certain amount of time after leaving the first company; non-disclosures require that the employee not talk about certain topics. On paper, these seem like reasonable concepts, but the real-world implications can be quite different. Companies considering non-competes and non-disclosures need to be aware of how these agreements can affect -- for good and bad -- the future of the company.

The Heart of the Matter

Both of these agreements are about protecting the company, period. Non-competes prevent employees from jumping ship to a competitor too quickly, and non-disclosures prevent employees from giving away company secrets or using company information to help competitors.

So if your company wants to have these agreements, it needs to get very clear on what it is trying to accomplish. If the company is concerned solely with protecting intellectual property, for example, a non-disclosure is perfect. A non-compete could go too far.

More Freedom to Move and Grow

Employees move around; it's a fact of life. Sometimes the only way for them to grow in their work and advance is to go to another company. A non-compete might make the chances of having to hire new employees much less of an issue, but it also can dead-end some brilliant employees, who then lose interest in their work. Productivity can suffer, and you can end up with cranky workers bad-mouthing the company or taking out frustrations on other workers.

Non-competes can be helpful if you create the right type. For example, having a full-time employee agree not to freelance for any competitors for the duration of that employee's time at your company is reasonable. But telling an employee that he or she can't work in an entire field or city (it's true: some non-competes are geographic, rather than field-based) for an extended time after leaving your employment is restrictive and can be seen as vindictive.

Non-disclosures are less problematic in this regard as long as the forbidden information is restricted to specific bits of knowledge. You'd be going a bit far if you wanted people to not use their own strategies for being productive at the new company, for example.

Beware of Overreach

And overreach is a real risk. That example about personal productivity strategies sounds like a joke, but these agreements really can go too far. It's overreach to prevent someone from working at all; for example, many hair salons have been known to have non-competes that basically bar stylists from working for other salons for an unreasonably long time or within a large radius of the original salon.

Always consult with a business lawyer to figure out the sanest approach to protecting your company while also not blocking your employees from their right to move away. You'll have a better reputation and find that your employees are often more satisfied with what they are doing.

Contact a law office like Souders Law Group for more information and assistance.