What HR Should Know About Noncompete Agreements

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HR Compliance
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Being able to enforce a noncompete agreement is no small task. In a tough economy or job market particularly, courts can be increasingly skeptical of agreements that limit an employee’s ability to find employment.

What is a non-compete agreement?

A noncompete agreement can be a clause in an employment contract or an entirely separate agreement between an organization and its employee that prohibits the employee from competing against the organization after he or she leaves the organization. Noncompete agreements are used either to prevent an employee from using the organization's confidential information after he or she no longer works for the organization or to prevent a former employee from soliciting or otherwise exploiting the organization's long-term customer relations. Either one or both of these interests may be at stake when an employee leaves an organization.

The problem with using noncompete agreements is that they often are not enforceable. The organization must first demonstrate that it has a "protectable interest"—usually defined as either confidential information or long-standing customer relations—before a court will consider enforcing the agreement. And even if the organization has a protectable interest, the agreement must be very carefully drafted.

Consider the following factors when deciding to use a noncompete agreement:

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