Rising use of non-compete contracts sparks controversy

Well drafted employment contracts are critical for many employers in the Columbia area. Successful companies often recognize that because employment is at-will under Maryland law, it is important to draw some contractual parameters. At-will employment means that both the employer and the employee have the right to terminate employment at any time for any reason that does not violate the law.

In many industries, non-compete contracts are a key element of employment contracts. Non-compete clauses are often used to keep a salesperson from leaving the company to work for a competitor, taking along clients and leads. Non-competes are also common in the technology industry where they are used to restrict employee movement in order to insulate companies from the theft of trade secrets and intellectual property.

In recent years, however, non-competes have spread into other roles and industries. The New York Times reported about this issue, calling attention to a summer camp that had camp counselors sign non-competes.

While non-competes can be necessary for a business to maintain its competitive edge, they are misused in certain cases and this has contributed to their flailing reputation. Some people think that non-competes go against labor rights or even that they inhibit local economies.

In Massachusetts, the governor has actually proposed banning non-competes in most circumstances.

Here in Maryland, it is very important for employers to remain aware that this is a controversial topic. While non-compete clauses and employment contracts in their entirety are critical tools to protect employers, they are only enforceable if they meet legal standards. A poorly drafted employment contract can actually invite lawsuits. Employers should seek legal counsel when crafting employment contracts to protect their businesses and minimize liability issues.

Source: The New York Times, “Noncompete Clauses Increasingly Pop Up in Array of Jobs,” Steven Greenhouse, June 8, 2014

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