Creating successful non-compete agreements

March 06, 2013 (Press-News.org) Creating successful non-compete agreements

Article provided by The Stevenson Law Firm, PC
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Creating successful non-compete agreements

In today's competitive market, many companies -- Fortune 500s, sole proprietors, nonprofits and more -- are taking whatever measures they can to protect the secrets of their business practices and prevent the loss of dedicated customers. If employers need to protect trade secrets, they may require employees to sign a non-compete agreement.

Non-compete agreements can be helpful in many situations. However, enforcement can be challenging, especially if they are not clearly formulated.

Non-compete agreements for doctors

Healthcare is a competitive field. Doctors operating a practice together might expect other physicians who join their staff to sign a non-compete agreement. In the medical arena, a non-compete protects the hiring practice from losing patients to doctors who want to open their own practice or move on to other practices nearby. Doctors' non-compete agreements may require that they not move to another practice or hospital within a certain distance from the hiring practice for a specific period of time.

However, some argue that a doctor's non-compete limits patients access to their preferred healthcare provider. Still others believe non-competes keep doctors from making a living or make it burdensome for them to establish and grow a practice.

As two recent cases in Chicago illustrate, though, when doctors refuse to honor what they see as unreasonable non-compete restrictions, they may end up in court fighting against their previous employers. And in spite of the costs associated with enforcing a non-compete, if a court issues an injunction in its favor, it is worth the price to the previous employer if it helps them keep their own practice financially viable.

The requirements of a non-compete agreement

To be legally binding, a non-compete agreement must have certain qualifications.

First, the prospective employee signing the non-compete agreement must be granted something in return. If signed upon the acceptance of a job, the job is the benefit granted. If an employer asks a current employee to sign a non-compete, the employer might provide something of extra value -- a bonus, a higher percentage of billings, etc. -- to make it worthwhile for the employee to sign the non-compete agreement.

Second, the non-compete agreement must protect an employer's legitimate and critical business interests or proprietary trade secrets. In the case of a medical practice, the business interest is that a doctor's patients may choose to follow him or her to a new practice, causing the medical practice financial harm.

Third, the terms of a non-compete agreement must be realistic. For example, if it prohibits an employee from working within a geographical area, that area must be limited in scope to ensure that an employer cannot keep an employee from taking a job in a geographical area that does not compete directly with the company.

Creating and signing non-compete agreements

Because of the specifications required to create a non-compete agreement that meets the requirements to be legally binding, and the concern it can cause when an employee is asked to sign one, legal advice can be invaluable when formulating or entering into such an agreement.

If you are struggling to craft a binding non-compete agreement, consult a business attorney. His or her expertise can help make sure that non-compete agreements are both fair and enforceable.