Non-Compete Agreements: Are They the Best Way to Go?

Non-compete agreements have become more common for American workers. Once reserved for high-level executive positions, non-compete agreements are now making their way through the workforce, reaching an estimated one in five American workers. While non-compete agreements have seen a large uptick in employees making under $40,000 a year, experts do not always agree on their applicability. Noncompete agreements can be beneficial in preventing your competitors from poaching your best employees, but they can also keep the best employees from even approaching your company.

Moving between workplaces to pursue professional development has become a normal part of the modern professional world. With changes in upward mobility and access to raises, employee loyalty has decreased from previous generations, making employees more likely to move to another company to pursue advancement. Because of this, employees expect to leave companies as a part of their career trajectory, so much so, that they may avoid a position all-together if they are faced with signing a non-compete agreement.

Tools like Glassdoor and Indeed ratings give potential employees more access than ever before to information about your hiring process and organizational culture. These can include whether your company requires a non-compete for various positions, and this may be included in ratings. In addition to hurting recruitment, non-compete agreements can be difficult to enforce, depending on what state you operate in.

Some states ban noncompete agreements to varying degrees. From refusal to enforce at all levels to bans for non-compete agreements for lower-wage positions, it may be more trouble than it’s worth for your business to require employees to sign them. Experts do not entirely agree on whether or not they can be helpful for companies, but most suggest continuing to use non-compete agreements for upper-level executive positions, where employees are more likely to stay for longer periods and have access to confidential information. At a lower level, it’s suggested that you use other means to protect your business while maintaining your ability to recruit the best possible employees.

Many businesses are turning to confidentiality agreements and non-solicitation (of customers and employees) clauses in their employee agreements. These allow you to protect trade secrets and maintain the integrity of your business without making your employees feel as if they are being limited or taken advantage of.  These agreements may not only act as protection but can increase your employees’ job satisfaction when used in place of non-compete agreements.

In the face of changing expectations of the American workforce, veering away from broadly used non-compete agreements can allow your organization to continue to compete at a level that will lead to success.  That said, no matter how you choose to approach the use of non-compete and other agreements, be sure that you have fully done your research into local, state, and federal legislation; be sure you are not only in compliance but that your organization will be able to successfully enforce these agreements if the need should arise.

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