In modern-day business culture, it is common for businesses to have restrictive covenants such as non-disclosure agreements for both new hires and existing employees. When well drafted, such an agreement helps protect a company’s proprietary and other confidential information. Non-compete agreements usually limit an employee’s ability to work in a competing business in a certain geographical area for a specific period of time. For example, an individual who is bound by a non-disclosure agreement and resigns from their job in Boston might be prohibited from working for a competing company in Massachusetts for up to one to two years.
Rules that govern non-compete agreements may vary across states. However, as long as a non-compete is reasonable and valid, most state courts will enforce it. One of the factors that determine the validity of non-competes is the presence of a bargain for promise or performance, also referred to as consideration. For new employees, consideration may exist if they sign a non-compete when they are initially employed. In other words, the employer’s promise to compensate the new hire for services rendered may be enough consideration. For existing employees, consideration requires other factors, such as a promotion, a bonus, or an increase in wages. In an event where the existing employee does not receive any additional benefit from signing a non-disclosure agreement, such an agreement may be unenforceable.
As for the reasonableness of a non-compete agreement, three factors are considered. The first is whether or not the limitations are necessary to protect the business or employer’s goodwill. The second is whether the restraint imposed on the employee is reasonably required to protect the business and its goodwill. The third factor is whether the public will suffer from the loss of the employee’s skills or services.
It is essential to consult an attorney with a good knowledge of employment law in your location if you are considering whether or not to use a non-disclosure agreement.
Memorandum of Understanding
A Memorandum of Understanding, commonly referred to as MOU, lies somewhere between a handshake and a formal contract. It plays a crucial role in documenting the conversations you have with your partners, suppliers, and other people involved in your business. An MOU is a great way to put the terms of a relationship or project in writing, but it is not always legally binding.
Other common legal documents include company bylaws for corporations, buy/sell agreements, and employee’s handbook.
Regardless of the type or size of your business, it is essential to have the correct legal documents in place. This can help you avoid problems that may hinder your business from becoming successful. It also ensures that you comply with state and federal regulations and avoid expensive legal disputes that may drain your business’s resources.