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Understanding Covenants to Not Compete as an Employer

Posted on in DuPage County Business Law Attorney

wheaton business lawyerStaying ahead of the competition is a critical factor in a company’s success. While some companies train their employees in unique and strategic manners, others have gained distinct intellectual property. When employees, especially those familiar with these unique properties, leave a company, the business may be subjected to subterfuge. To avoid risking this level of vulnerability, a company may require their employees to sign a covenant to not compete

Defining Covenants to Not Compete

Covenants to Not Compete, more commonly known as Non-Compete Agreements, act as a form of protection for businesses. The agreements prohibit employees from taking a job with a direct competitor within a given amount of time, thus, reducing the chances of the competitor learning of the business’s advantageous practices, including trade secrets and client lists. 

It is not uncommon for non-compete agreements to accompany an employment contract. While requiring new employees to sign such agreements is fairly common in today’s competitive landscape, courts have the authority to invalidate the agreement and leave the employer vulnerable. Collaborating with a business law attorney can help companies ensure that their agreements are both enforceable and adequately protective. 

Employer Requirements for Enforceable Non-Compete Agreements 

Because courts are often biased toward non-competes, as they may be interpreted as anti-competitive, it is important for businesses to take the necessary steps to properly form these agreements and enforce them appropriately. Almost all jurisdictions are going to require non-compete agreements follow these guidelines:

  • The agreement safeguards valid business interests of the employer, including intellectual property, specialized training, and customer and client goodwill.

  • Upon signing, the agreement was supported by consideration.

  • The agreement’s required time span must be reasonable and cannot diminish the former employee’s ability or right to earn a living.

It may also be required for the agreement to be limited by geographic scope. The distance can be established by a specific number of miles from the business location. Other limitations may be placed on the former employee’s permitted activities, such as what type of position they may hold and what information may not be disclosed. 

Contact Our Wheaton Business Law Attorneys

Recently, the state of Illinois has seen changes to laws pertaining to non-compete agreements. Referred to as Covenants to Not Compete in Illinois, how courts handle and address this type of agreement can vary greatly. At Stock, Carlson & Duff LLC, we understand the time and effort business owners put into their company’s success. Our DuPage County business law attorneys can assist in forming a viable, comprehensive, and enforceable non-compete agreement for your business. If you are interested in building a non-compete agreement or are facing a former employee attempting to violate the agreement, contact our firm today to schedule a free consultation by calling 630-665-2500.

Sources:

 

https://www.ilga.gov/legislation/BillStatus.asp?DocTypeID=HB&DocNum=3066&GAID=16&SessionID=110&LegID=131989

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