Can companies require workers to sign non-compete agreements?

On Behalf of | Sep 15, 2022 | Business Law |

With every new hire, your company takes on new risk. Workers can harass one another, do such substandard work that it damages your company’s reputation or leverage what they learn at your company to compete against you later.

Your employees could make copies of your client list or learn all about your trade secrets, only to go start a competing business. On the other hand, they might accept a job with a company in the same industry. The simplest and most effective way for your business to protect itself involves using restrictive covenants in your employment agreements.

Can businesses demand that workers sign non-compete agreements?

Businesses do have the right to protect themselves

Employment contracts serve to clarify what each party can expect from one another and to minimize the risks that the company has to absorb when hiring someone. Including a non-compete agreement is an effective way to minimize how much damage a worker can do to your company after leaving their job.

Businesses have the right to limit what their workers do during their employment and also sometimes for a period following their employment as well. However, if you want a non-compete agreement to hold up in court, a worker should receive some kind of valuable consideration for making those concessions to your company. Both Massachusetts and Rhode Island impose restrictions on non-compete agreements.

Many companies include non-compete agreements in their new hire paperwork. That way, the job itself is the valuable consideration that the employee receives for their concessions. Otherwise, the company will have to come up with an appropriate form of compensation, like an extra vacation day or a one-time bonus, to provide something of value for the workers to agree not to compete after leaving the company.

It is easier for a company to require that new hires sign non-compete agreements than it is to retroactively compel workers to sign them after starting a job.

How do you enforce a non-compete agreement?

A non-compete agreement will do very little to benefit your company if you do not actively enforce it. You will need to keep an eye on your competitors and your employees after they leave your company to determine if any violation has occurred. You will typically then need to take the former employee to court to either stop the activity that constitutes a violation or seek damages as outlined in the agreement.

Learning more about the employment law regulations that govern contracts will help your business more effectively protect itself.


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