Does a Non-Competition Agreement Really Help Your Business? Pros and Cons - Growth Freaks

Does a Non-Competition Agreement Really Help Your Business? Pros and Cons

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A non-competition agreement is an agreement signed between an employer and an employee, in which the employee agrees that he or she won’t get a job with one of the employer’s competitors right after terminating their contract with the current employer. While not all companies choose to opt for a non-competition agreement, some of them consider it a beneficial thing for the development of their business. Today, we’re going to go through the pros and cons of a non-competition agreement and see whether or not it can really help businesses thrive.

Non-Competition Agreement Pros

1. Confidentiality

One of the most important benefits of a non-competition agreement is the fact that the employer can make sure that certain confidential information won’t transpire if the employee decides to get a job with the competition. Even if this agreement expires after a while, it can at least protect the employer for a short period of time.

2. Customer Retention

It can happen that when an employee gets a job with one of your competitors, he or she will also bring said competitor a number of loyal customers. Which is why signing a non-competition agreement can be a good idea. It ensures that your company won’t lose important clients whenever someone terminates their contract with you.

3. Performance

Another pro of having a non-competition agreement is the fact that when you lose high-quality employees, you know they won’t get hired by a competitor right away. This would most likely cause your company’s performance to decrease. At the same time, your competitor will get to enjoy the expertize of your former employees.

Non-Competition Agreement Cons

1. Legal Issues

Having a non-competition agreement can lead to different legal battles, either initiated by the employer or the employee. For instance, the employer might legally pursue an employee who didn’t respect the agreement. Or the employee might consider the agreement too restrictive and decide to speak up.

2. Unnecessary Trouble

Sometimes, the employment contract that people have to sign whenever they get a job already includes a clause that stipulates that the employee shouldn’t divulge confidential information to a third party. In this case, an additional agreement would be unnecessary. Not only that, but it would also pressure the employees and create an atmosphere of constant anxiety.

3. Reputation

An extremely important con of this type of agreement is that potential employees might decide to get a job with a company that doesn’t include such an agreement in their contract. Many people feel like this agreement limits their ability to choose what they want to do next.

4. Employee Retention

Finally, as an employer, it might be difficult for you to convince employees to continue working for your company if you have a non-competition agreement. Even more so, this agreement might actually hasten their decision to leave.

It’s true that a non-competition agreement can help some businesses thrive. However, while there are undeniable pros, the cons should be taken into account as well. Ultimately, it’s your choice whether or not you want to draft such an agreement. The important thing is to carefully consider all the pros and cons beforehand.

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Author: Amanda Knowles