Successful and growing companies often go to great lengths to negotiate contracts with workers that will protect the company. They include very clear rules for different types of compensation and the expectations that the company has for someone’s job performance. They will also include special terms that can protect the company from certain types of risk, including the potential future misconduct of a worker
Restrictive covenants give a business an opportunity to impose restrictions on future economic activity and create penalties for violations of the employment contract. One of the more popular restrictive covenants is the non-compete agreement. This type of agreement effectively prohibits an employee from starting a competing business after leaving their job or going to work for a direct competitor.
However, there are warning signs of a federal ban looming on the horizon that could have major implications for employers who rely on non-compete agreements to protect against worker misconduct. What can companies do if they cannot rely on non-compete agreements to protect them from a worker leaving their employment and becoming a threat to the company’s operations or profitability?
There are other restrictive covenants
Even if the Federal Trade Commission (FTC) does move forward with the proposed ban on non-compete agreements, businesses could still potentially utilize non-solicitation agreements to prevent former workers from trying to tempt away clients and employees. Non-disclosure agreements can also be useful inclusions in employment contracts, as they can prevent a worker from taking information gathered while working at a company and providing it to the public or competitors.
Companies renegotiating employment contracts with workers already employed by the organization may need to offer some kind of incentive or valuable consideration for the employee making certain concessions. A one-time bonus or even an extra vacation day could potentially be adequate to justify having an employee sign a new contract that includes restrictive covenants.
Small mistakes when signing an initial employment contract or negotiating a new one could lead to the courts refusing to uphold that contract later. Ensuring that all employment contracts comply with those state and federal standards will be of the utmost importance for businesses seeking to protect themselves through a written agreement with the professionals they employ.