Non-compete agreements can be beneficial for companies because they restrict worker movement. Business owners sometimes feel as if they are simply training employees who then move to the competition, taking that expertise with them. A non-compete agreement helps to keep the top talent at the initial company long-term.
There are a few things to consider when determining if these agreements are legal or not. For instance, they often need to have both geographical limits and time constraints. An agreement may be valid if it says that the employee cannot work for the competition in the same city for the next year, for instance, but would likely not stand if it said that they couldn’t work anywhere in Nevada for the next 10 years. The agreements have to be reasonable in order for courts to actually enforce them.
Do the workers get an hourly wage?
Another thing that business owners need to consider is how their employees are paid. It used to be that all employees could be given non-compete agreements, but this is no longer true. Two years ago, the law was updated to state that non-compete agreements cannot be used for hourly workers. Even if they’re getting tips and other types of compensation, if their base pay is an hourly rate, they cannot be restricted by these agreements.
If you are a business owner, this doesn’t mean that you can’t use the agreements, of course. But it means that you have to convert the employees who are under these agreements into salaried workers so that they are not getting an hourly wage. They could then sign a contract stating how long they will work at the company for that salary.
As this shows, the laws do get updated and changed at certain times. It’s very important for business owners to understand what these changes will mean for their legal options.