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5 questions to ask when creating a noncompete agreement

 Posted on May 14, 2018 in Uncategorized

For various reasons, you may have decided that your company should utilize noncompete agreements when working to prevent your trade secrets or other important information from falling into the hands of your competitors. These agreements certainly have their uses, and if you believe that having such a contract could work toward protecting your company's best interests, it may prove wise to gain more information on these agreements.

In particular, you may want to focus on the enforceability of any contracts you create. Many business owners feel surprised to find out that their noncompete agreements do not meet enforceability requirements. As a result, they may not provide as much protection as hoped.

How to ensure enforceability

Fortunately, you can take steps to ensure that your noncompete agreement does not present issues that could later render it invalid. Some questions you may want to ask when drafting your contract include the following:

  • Is the agreement used to protect legitimate business interests?
  • Do the terms of the agreement set a reasonable duration time period?
  • Do the terms of the agreement set a reasonable geographical restriction?
  • Have you given the employee or prospective employee incentive to sign the agreement?
  • Does the agreement meet stipulations specific to Texas state laws?

If you answer "no" to any of these questions, your agreement may not hold up. For instance, if you have no legitimate reason to restrict employees' future employment opportunities, an employee or former employee could challenge the agreement's enforceability. Additionally, if the terms of your agreement place too much of a restrictive burden on the employee concerning the area and duration of the contract's scope, a court could deem it invalid.

You may also need to take other factors into consideration when creating your agreement depending on the industry category of your company, the type of job you are wanting to restrict and other details of your specific situation.

Creating an enforceable agreement

Understandably, you may not have an extensive working knowledge of business law, especially when it comes to the minute factors that could render an agreement unenforceable. Fortunately, you could enlist the assistance of a legal professional to help you draft your noncompete agreements rather than attempting to work alone. An attorney could help make sure that the terms of your agreement meet necessary stipulations and work to protect your company's interests.

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