Business Owners: Consider Alternatives to Noncompetes

On Behalf of | Feb 15, 2023 | Business Law

Noncompete agreements have gained a lot of interest among employers looking to secure their business in the market. However, for reasons we will discuss below, it may be wise to consider using alternative means of protecting your company if you are a business owner.

Why consider alternatives?

It might seem like having a contract with employees preventing them from moving to a competitor is a great way to secure sensitive information. However, doing so with a noncompete may not be the best way to do this.

For starters, noncompete agreements may not always be a viable option. There have been efforts at the state and federal levels to ban noncompetes. Most recently, the Federal Trade Commission (FTC) proposed a ban on noncompetes for paid and unpaid employees and independent contractors. 

Additionally, alternatives can be appropriate when there is no legitimate interest to protect from a specific worker or when your concern is shielding the information, not restricting the worker. 

Under these circumstances, examining other ways of protecting your business can be wise. 

Types of alternatives

Several other tools can shield information from competitors when an employee departs your company. 

  • Non-solicitation agreements: These agreements prohibit a worker from soliciting or recruiting your current employees and clients. Often, these restrictions are in place for a defined period of time to keep the departing employee from taking away business or productive employees.
  • Non-disclosure agreements: These clauses can prevent the departing employee from disclosing any sensitive, confidential information the employer has shared with the worker. 
  • Stricter protections: In some cases, the best way to protect information is to restrict employee access to it. If you have proprietary information or data you don’t want competitors to have, then be sure you take steps to keep it private. You might do so by tracking access, requiring unique user names and passwords and providing regular training on proper information handling and dissemination practices.

If these tools aren’t quite right, you can still consider having a noncompete agreement. However, you must ensure the contract is valid, enforceable and reasonable. If it is not, the courts may not uphold it.