Legal Business
In contract law, a non-compete clause is an agreement that prevents the employee from entering into competition with the employer upon termination of the working period. The legal agreement is drafted to ensure that the employee does not engage in a market or a profession that is in direct competition with the previous employer (Buenstorf et al 2016).
Non- compete agreement, and non- disclosure agreement is both restrictive legal contracts but different in a way. Non- compete agreement is used to prevent the employee from forming a rival company of joining a competitor. On the other hand, a non-disclosure agreement is a confidential agreement that only restricts the employee from disclosing the company’s delicate information after the employment period is terminated (Tanwir & Hendrawan, 2018). Non- disclosure agreement helps to prevent sensitive information from falling in the hands of the competitor and ensuring the company’s maintaining its competitive advantage.
The terms included in the non-compete agreement determines its validity. In a situation where the agreement restricts the employee from ever exercising their employability skills, the contract may be considered invalid. For instance, in a case where the employee has been a chef their whole life and the contract restricts them from ever cooking to another restaurant, then the agreement may be considered invalid (Marx 2018). In such a case, the agreement restricts the employee from ever working for a living. However, if the terms only restrict the employee from ever making a particular dish or working for a specific restaurant, then the contract is considered valid.
If I owned a business, I would consider including a non- compete clause in my employment contracts. For example, when working with an employee who produced certain products for my business, I would prefer the employee to sign a non- compete clause and agree not to start a rival company or join a competitor. The contract will help in ensuring my employee does not disclose my production strategy to another organization.
References
Buenstorf, G., Engel, C., Fischer, S., & Gueth, W. (2016). Non-compete clauses, employee effort, and spin-off entrepreneurship: A laboratory experiment. Research Policy, 45(10), 2113-2124.
Marx, M. (2018). Reforming non-competes to support workers. Policy Proposal, 4.
Tanwir, R. F. M., & Hendrawan, D. (2018). Use of Non-Disclosure Agreement as LegProtection in Trade Secrets to Investment Security. Central European Journal of International & Security Studies, 12(4).