Particularly if your business revolves around sensitive information, you may have new employees sign a non-compete agreement. Non-compete agreements are unique in the business world. This is a contract that does not come into effect until after either the employee or employer terminates the business relationship.
For this reason, you must ensure that the courts will enforce your non-compete agreement if it is necessary. According to FindLaw, in order for your non-compete agreement to be valid, it must be reasonable in both scope and duration.
If a non-compete agreement is “reasonable in scope,” this means that it does not impose geographic limitations on the ex-employee to an unreasonable amount. Essentially, this portion of the non-compete agreement tries to ensure that a former employee does not immediately turn around and set up a competing business directly in your geographic locale.
However, it is up to you to decide how large or small of a locale you wish your non-compete agreement to address. It is (likely) not reasonable for you to forbid a former employee from opening up a competing business in another state.
“Duration” measures how long an ex-employee must keep quiet about sensitive information. It is unlikely that you will be able to use a non-compete agreement to swear somebody to secrecy for the rest of their lives.
This means that in order for your non-compete agreement to be reasonable in duration, you must calculate how long sensitive information retains value for your business. What makes a non-compete agreement reasonable in both scope and duration depends on the needs of your particular business and the information you are trying to protect with the agreement.