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Paying for noncompete agreement?

by on
in Employment Law,Human Resources

Q. We are a small company that has to aggressively market ourselves to our customers in order to compete with larger suppliers. To protect our client base, our COO wants to require our sales force to sign a noncompete/
nonsolicitation agreement. If we want our salespeople to sign off on a noncompete agreement, do we have to give them anything in exchange, like a bonus?

A.
You do not mention whether your business has any facilities outside Indiana. If so, it will be important to check local requirements, as each state has its own rules governing the terms and conditions of noncompete agreements.

Assuming that your business is solely within Indiana, the short answer to your question is no. In Indiana, continued employment is deemed sufficient consideration for purposes of making a noncompete valid.

That said, there are several issues to consider before moving forward on your COO’s plan. First, you should always engage the services of a qualified attorney to draft or revise your noncompete agreements. Courts generally do not like noncompetes, and if your agreement does not comply with the strict requirements established by law, the agreements will not be enforced.

Second, the agreement must be reasonable—it should prevent competition only for a reasonable period of time (generally one to two years) and only within a reasonable scope (generally the geographic area where the employee works).

Third, think carefully about requiring a noncompete agreement if you are unwilling to engage in the expensive and time-consuming legal process to enforce it.

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