Pros and Cons of Non-Compete Agreements

When you are hired by a company, you may be ordered to sign a non-compete agreement. This is a common agreement that certain types of employees sign to reduce competition for the employer. But what exactly does this mean?

When you work for a company, you will likely learn trade secrets, which is a certain device or technique the company uses to sell its products or services. For example, Coca-Cola uses a special formula for its beverages. If you work for them, they more than likely don’t want you to use your knowledge to work for Pepsi. To prevent this, Coca-Cola would make you sign a non-compete agreement.

Besides protecting trade secrets, non-compete agreements have other benefits, but mostly for companies. They have some downsides as well, and usually employees are the ones who have to deal with them. Here’s a look at the pros and cons in more detail.

Pros of Non-Compete Agreements

Non-competes can be good in various ways:

• They curb inflation. They keep wages low, which keeps inflation low as well.
• They encourage companies to invest in employees. Companies are more likely to train employees and trust them with sensitive information if they know they won’t jump ship after their training period is over.
• They reduce turnover. A company that has trouble keeping employees may be able to keep employees longer by enacting a non-compete agreement. Workers would be less likely to job hop, which would result in savings for companies who must spend time and money training new employees.

Cons of Non-Compete Agreements 

Some downsides of non-competes include the following:

• They restrict job mobility. People of all walks of life may be ordered to sign a non-compete agreement. This includes fast food workers, journalists, construction workers, hair stylists, and hotel workers. These contracts keep low-wage workers at dead-end jobs.
• They keep wages low. Noncompete clauses give companies power over workers. Since employees have restrictions when it comes to finding new employment, they are stuck at their current jobs, which may not pay much more than minimum wage.
• They disallow innovation. There is evidence that non-compete agreements are bad for innovation and growth. They are basically used to keep workers put, so they can’t quit to find a better job unless they search outside their industry. These agreements also stop employees from launching their own businesses.

Contact a Business Litigation Lawyer Today

Owning a business is not as easy as it seems. There’s a lot involved and business owners seek to protect themselves with contracts. These contracts may seem unfair and lead to conflicts.

A Bradenton business litigation lawyer from Cahall Law Firm can help you resolve your business matter. We take the time to explain the risks and consequences of business litigation so our clients can make rational business decisions. To schedule a free consultation, fill out the online form or call (941) 281-2019.

Source:

theweek.com/pros-and-cons/1019883/the-pros-and-cons-of-noncompete-agreements