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The Benefits of a Non-Compete Agreement

Competition is an element of business that forces companies to operate at peak efficiency and make use of every possible advantage they can find over other companies competing for their customers. While competition is thought to be a healthy force that helps to improve the products and services that companies offer, it can also be a driving force behind unethical business practices when companies or individuals do whatever it takes to get ahead of their competitors. One manner in which companies can protect themselves against unethical or unnecessary competition is through the use of a non-compete agreement.

Protecting Privileged Information from Disclosure

A non-compete agreement is used by companies to prevent employees who have access to privileged information from working for a competitor directly after terminating their employment with the company. Many times, companies invest a great deal of resources into the training of employees in order to maximize their productivity within the company. These employees eventually gain access to most, if not all, of the critical information the company utilizes to maintain its operations as well as its position in its chosen marketplace.

The ability of the company to maintain the secrecy of this vital information can be the difference between success and failure, so using a non-compete agreement that binds the employee to secrecy is an excellent way to help protect it. It also prevents an employee from opening their own company utilizing the trade secrets garnered from a company they worked for and competing directly against it.

Preventing Unfair Competition

A non-compete agreement can also be used to prevent a business owner from soliciting the customers of a business that they just sold. It is an unfortunate reality that at times, business owners sell their company for profit only to turn around and reopen a competing business nearby that caters to the same customer base. This creates an unfair advantage since the business has access to all of their old customer information and can market directly towards that customer base. A non-compete agreement can legally prevent the seller of a business from opening a competing business within a certain distance or within a certain time frame after the sale. This guarantees that the newly purchased business will not face unfair competition from the original owner.

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