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How to draft a noncompete agreement for your business

The people who work for your company can help improve your business, but they can also devastate your long-term prospects. You probably have trade secrets, personal recipes or proprietary processes that give your products unique features that appeal to customers.

When employees learn about your trade secrets, they might want to use that information for their own enrichment, even if it hurts your company. Drafting a noncompete agreement can help protect your business from employees that would steal your information and either use it for themselves or give it to a competitor.

A noncompete agreement needs specific terms

The courts in Kentucky have repeatedly ruled on broad noncompete agreements. For decades, the courts have struck down agreements that don’t include geographic limitations or specific time frames. Restrictions on an employee’s future activity should not cause that worker undue hardship. Restrictions that apply nationally or globally or those that do not end can easily cause hardship by locking a worker out of their preferred field.

Permanently denying a skilled worker the opportunity to work in the same industry or trying to restrict their employment across the entire country might mean that the courts throw out your noncompete agreement. Limiting restrictions on future employment and business ownership to specific areas near where you operate and a limited amount of time will increase the likelihood of the courts upholding your agreement.

Ensure that employees receive something of value for signing

Other than unconscionable terms that harm the worker, one of the biggest risks for invalidating a noncompete agreement stems from how they sign the document.

You cannot just ask existing staff members to sign a new contract that doesn’t offer them any benefits. You might offer a single extra day of vacation pay for one year or a one-time bonus. You can also make signing the contract a condition for initial employment or any promotions received as an existing employee. You need to be able to show to the court that the worker received something for giving up some of their future employment opportunities.

Being careful in the language you use when drafting a noncompete agreement and giving something to employees who sign it can increase your chances of it holding up if you have to go to court.