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Wiley & Mathews

Common mistakes with noncompete agreements

A good noncompete agreement isn't out to limit a former employee's prospects in life or penalize a company's prior owner. Noncompete agreements are designed to protect legitimate business interests in an increasingly competitive world. That makes it especially important that you avoid sabotaging yourself when dealing with them.

Here are some of the top mistakes people make when noncompete agreements are involved:

  1. Assuming that noncompete agreements can't be enforced. Overly broad noncompete agreements caused a bit of a backlash and brought about new restrictions, but the majority of states still allow them (and enforce them, as long as they are reasonable and comply with the law).
  2. Thinking that a new employee's noncompete agreement with a former employer is their issue to handle. Buy into that fallacy and you can end up dealing with costly litigation, including accusations of tortious interference with another company's business or something similar (among other problems).
  3. Thinking that a noncompete agreement designed in one state is valid in another. Noncompete agreements have to be tailored for each situation and jurisdiction. If you're engaged in multistate operations, you cannot use a "boilerplate" noncompete agreement with any real expectation of success.
  4. Not having legal counsel review any noncompete agreements that may affect your operations or business in some way. This includes restrictive covenants held over prospective employees, noncompete agreements that you want your current employees to sign and any restrictive covenants you use with vendors.

If you're using noncompete agreements, get experienced legal assistance. The disruptions to your business from a lawsuit over a bad noncompete agreement or a mistake can be a tremendous drain on your company's time and resources.

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