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Do you have a non-compete clause in your company’s contract?

On Behalf of | Jun 22, 2021 | Breach Of Contract, Business And Corporate Law

If you own a company in Michigan, you may have your employees sign an employment contract. One of the terms you may include is a non-compete clause or non-compete agreement to protect your proprietary interests. There are many things to consider when constructing this common provision so that you can ensure the clause is enforceable.

A non-compete clause aims to protect the business interests of your company by placing limitations on where your former employee may obtain employment for a specified period of time after leaving your workplace. According to Forbes, there are three main things to consider when drafting this provision:

  • Purpose
  • Restrictions
  • Enforceability

First, you need to understand what the purpose is and that is to protect your sensitive information such as intellectual data, company goals, marketing techniques and financial strategies. A second function of the clause is to limit where this employee can go after leaving your company, thus preserving your propriety information from being shared either intentionally or inadvertently with a competitor.

When drafting a non-compete clause you must be reasonable in terms of the restrictions you place on this employee with respect to time and geographic limitation. If your clause is seen as too restrictive and greatly hinders your employee’s ability to find future employment, it may be deemed unenforceable. And, there must also be consideration given, generally in a monetary form, for this contractual provision to be seen as valid.

This information is not intended as legal advice but rather to educate you about this clause that is common in business law.