If you are starting a business with employees, it is important to streamline your onboarding process. Depending on your business, you may wish to include a non-compete agreement with your hiring paperwork.

Not all companies need non-compete agreements, but if it is something that interests you, it is important to understand the basics. According to Findlaw, a non-compete agreement can protect you from a former employee exposing trade secrets or directly competing with you.

How can a non-compete agreement help?

Non-compete agreements help protect your business by outlining what employees can and cannot do once they leave your company. However, many times non-compete agreements are not legally legitimate and the court dismisses them. For example, you cannot prevent an employee from earning a wage once they leave your company.

However, a good non-compete agreement will protect your legitimate business interests. For instance, if you own a restaurant with a secret recipe, it will prevent an ex-employee from disclosing the recipe.

What makes non-compete agreements invalid?

The key thing to keep in mind when crafting a non-compete agreement is reasonableness. The courts want to see that your non-compete agreement protects you but does not put too much burden on an ex-employee. For instance, you may be able to prevent an ex-employee from opening a competing business in your geographic locale, but you are not able to prevent a former employee opening up a competing business elsewhere.

Non-compete agreements also need to be reasonable in their scope. Usually, you are not going to be able to swear someone to secrecy forever. So if you have a secret recipe, you can probably prevent the employee from divulging it for a few years, but not a lifetime.