A non-compete agreement seeks to protect your California small business from unfair and potentially harmful competition. Yet, to help you, your agreement has to hold up in court. Certain elements or omissions in a non-compete agreement have the potential to make it invalid or unenforceable, and this may cost your company time and money you could otherwise spend running your business.
According to the National Law Review, the following are common errors many business owners make when drafting non-compete agreements for their employees or partners.
Making too many restrictions
The terms of your non-compete agreement have to be reasonable to hold up in court. You need to be careful when setting restrictions on your agreement that are too broad in scope. For example, you only need to restrict your former employee’s activities for a length of time that is necessary to protect your business’s legitimate business interests. Making too long of a restrictive period may come back to bite you. You may also find yourself in trouble if you restrict your former employees from taking on jobs within too broad a geographic area.
Failing to ask workers about other non-compete agreements
You may also find yourself in trouble for neglecting to ask your workers about other non-compete agreements they may have signed before coming to work for you. In some cases, an employee’s former employer may file a lawsuit against you because you interfere with an existing contract. To avoid this, ask each new hire whether they are already under contract with a previous employer and be sure to document all employee answers.
Avoiding these common non-compete agreement mistakes helps ensure that your contracts hold up, should you find yourself involved in contract litigation.