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Noncompete agreements: Not just for executives anymore

Noncompete agreements, once the exclusive purview of high-level executives, have now permeated the entire labor landscape.

The increase in use of these employment contracts are likely the result of employers' recognization of the value of thier intellectual property as well as the ever-present temptation to attempt to restrain competition.

A recent survey by economists revealed that one in five employees were bound by noncompete clauses in 2014. Another survey showed that noncompete and trade secret lawsuits have nearly tripled since 2000.

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Many employees claim that they were unaware of the document they signed that would prevent them from leaving for a competitor. Regardless of workers' education levels, most lack the basic understanding of a noncompete agreement. They usually have it sprung on them to sign with little chance to negotiate. Often the first time they recognize the signficance of the document they have signed is when they receive a cease and desist letter.

A 2011 paper from the Sloan School of Management at M.I.T. found that employers typically present these agreements for an employee's signature on their first day of work.

The Challenges Employers And Employees Face

American workers continue to face challenges in the workforce. Globalization and automation force them to compete with overseas labor and cutting-edge machinery. The rise in contract employment is making steady jobs less likely. Unions are in decline as is their once formidable bargaining power.

Employers cite the need to secure company confidential information and trade secrets. More and more employees at all levels, particularly those who work remotely, can access work-related systems at any time of day or night. Significant challenges exist in protecting confidential information from getting into the hands of competitors.

The increase in the use of noncompete agreements is potentially problematic for both employers and employees. The proliferation of noncompete agreements makes it more difficult, for example, for employers to hire new employees wihtout risking potential liability with an employee who may be bound by a noncompete agreement. And it is becoming more common for employees to be required to sign noncompete agreements as a condition of employment. One must also consider the cost of enforcing and challenging noncompete agreements.

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