Businesses craft non-compete agreements because they are helpful when it comes to protecting confidential information and customers, retaining valuable employees, and avoiding unfair competition.
However, if the agreement is not well-drafted, it can be unenforceable in court and cause all kinds of other problems for your business.
From our team of experienced business attorneys at the Generations Law Group, here’s everything you need to know about non-compete agreements in Idaho.
What is a non-compete agreement?
A non-compete agreement is entered into by an employer and an employee. It prevents the employee from engaging in any business or profession in direct competition with the employer.
In other words, when you sign this legal contract as an employee, you agree that you will not compete with your employer during or after employment. An employer cannot force an employee to sign the contract.
However, the employer may choose to terminate the employee’s employment contract or refuse to give a prospective employee a job if they refuse to sign a non-compete agreement.
Are non-compete agreements enforceable in Idaho?
In general, courts do not approve of these agreements. There are factors that a court considers when resolving disputes over non-compete contracts, and the judicial enforcement process is quite fact-intensive.
That is why employers must ensure that the agreement is well-drafted before asking their employees to sign it. The agreement should be drafted in a way that makes it enforceable in Idaho court.
Due to the fact-intensive nature of the judicial enforcement process of these agreements, there are several misconceptions regarding their effectiveness. As a business owner, you have to make sure that you craft a non-compete agreement that provides maximum protection if the terms of the agreement are challenged in court.
To achieve this, it is important to consider some of the typical pitfalls with non-compete agreements discussed below, and to discuss the details of these pitfalls with a dedicated Idaho business attorney before you make a decision.
1. Failure to adequately identify what you want to protect
One of the main pitfalls employees face is that the non-compete agreements they ask their employees to sign usually do not specify the business interest they wish to protect.
Because many factors are considered by the court when determining the reasonableness of enforcing the agreement, there must be a recognized business interest that needs to be protected.
In many instances, employers ask employees to sign the agreement because it is considered standard business practice. But it’s important to remember the agreement is a legal document capable of being enforced in a court of law.
It is necessary to ensure that the agreement contains clauses that clarify the business interest that needs to be protected.
2. There was no consideration for signing the agreement
Another common mistake that businesses make with non-compete agreements is making an already-hired employee sign the contract without giving that employee something of value in return.
Courts can refuse to enforce the agreement if the employer asks an already-hired employee to sign without offering the employee something of value in exchange. This is called additional “consideration.” Consideration is a legal term that means an exchange of value.
The bottom line is that when an employer asks an existing employee to sign a non-compete agreement, the employee must be offered additional consideration to make the agreement enforceable.
3. Adopting a one-size-fits-all approach
Some employers fail to realize that a non-compete agreement that works for a particular business or industry might not necessarily be appropriate for their specific business. Similarly, some employers also make the mistake of using the same non-compete agreement for every employee.
While specific terms of a non-compete agreement might be well-suited for one employee, such terms could be counter-productive if used with a different employee.
Adopting that one-size-fits-all approach can render the agreement unenforceable because it will not be adapted to the business’s particular needs. So, it is necessary to make sure that the non-compete agreement is crafted to consider the specific needs and circumstances of your business.
Experienced contract lawyers in Idaho
At Generation Law Group, we have over 45 years of experience helping clients draft non-compete agreements and other agreements tailored to a business’s specific needs. Contact us today to schedule a consultation and make sure your business is protected.