As a business owner, you need to protect your business’ strength and profitability as much as possible. Depending on what type of business you own, you may consider having noncompete agreements for your employees as part of that.

If you are a high-tech New Jersey startup, you may be investing in specific training for employees. Or you might be hiring someone specifically because of the skills and knowledge he or she brings to your startup. In some cases, a noncompete agreement can benefit you, so you reap the rewards of investing in employee training or giving a highly sought-after employee a generous employment contract.

Noncompete agreements also can be beneficial if you only have a few competitor businesses. You likely want to avoid having another company try to lure away your employees to gain access to their specialized knowledge, product development knowledge, sales and marketing information or more.

Noncompete agreement basics

For a noncompete agreement to be enforceable, it must contain the following:

  • A date when the noncompete agreement begins
  • Specific dates the employee(s) signing the agreement can’t work for a competitor or in a specific location
  • A reason why the noncompete agreement is necessary
  • Information on how the employee(s) will be compensated for signing the agreement

Disadvantages of a noncompete agreement

Many states, including New Jersey, will uphold a noncompete agreement only if the agreement is reasonable. It can’t last for years and cover a wide area range. Courts also generally do not favor noncompete agreements that hamper those with skills in high demand from gaining employment for long periods of time.

Seeking legal advice

When considering having an employee sign a noncompete agreement, you need to consult a business law attorney. An attorney can ensure your noncompete agreement is well-crafted and will stand up to legal scrutiny.

An employment law attorney also can advise you when another form of an employee contract would serve your business needs better and is likely to being challenged in court.