Should I Worry About Signing A Contract With A Non-Compete Clause?admin Whether you’re an employee of a company or a business owner finalizing a partnership deal with another company, the non-compete clause is often included in the final contract. Should you be very worried and hesitant in signing a contract with a non-complete clause in it? The non-compete clause
The textbook definition of a non-compete clause is that it is a form of restrictive covenant that adds limitations to the employment or sale contract. These agreements protect the business by restricting the other party from performing similar work for a specific period of time within a certain geographical area. It’s important to note that the courts do not always uphold them. In fact, the courts evaluate non-compete clause for their reasonableness to determine whether they constitute an unfair restraint on trade.
Is the non-compete clause reasonable?
You need to evaluate the non-compete clause very carefully as many of them have a lot of “bark without much bite” language in them. In other words, it’s used as a deterrent in some cases and isn’t actually enforceable because it’s too unreasonable. Most courts will evaluate a non-compete clause based on the time prohibition, the geographic scope and the description of what constitutes a competitor. Typically, the broader the restrictions, the less enforceable the clause will be if evaluated in a court of law. Therefore, if a business contract states that you shall pay x amount of dollars if you fail to meet the conditions of a non-compete clause, you shouldn’t worry so much about that particular penalty as it may not be enforceable.
Always protect yourself
Even though the non-compete clause may not be entirely enforceable, you’ll want to be very proactive in protecting yourself and/or your business. Make sure you negotiate the terms of the contract so that it is at least mutually beneficial for both parties.
BIDaWIZ is an online marketplace where small businesses can obtain professional tax, accounting and financial advice and services from a network of over 750 online CPAs, EAs, CFPs & Tax JDs. BIDaWIZ suite of services include the ability to ask professionals finance and tax questions for free, find an accountant online and work with them, and to subscribe to the premium tax and financial newsletter and knowledge ba