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Are Non-competes a Good Idea for Startups?
Insights From Mettl Company Insights

Since there is no established SOPs, rules, legalities in a startup and a lot of regulations are still being formed, startups can tweak hiring contracts and covenants according to what suits them. Non-compete as an agreement or clause in hiring contract can be beneficial and indispensable in some departments and business functions like product development and management, and technology because of intellectual rights, trade secrets, client data, and proprietary technology which you certainly don’t want to lose to the world. Even if having an employee on non-compete terms is expensive, it’s the right way to go about hiring because these employees will be working with internal data which acts as your competitive advantage and can be your USP. Non-compete clauses can be done away with it when hiring in functions like marketing, sales, and PR and communication- teams which work on the periphery of products and proprietary technology and work on general aspects of your business shared in common with all the other businesses. For such job descriptions, you can hire freelancers and part-time professionals which also happens to be a cost-effective way to hire in a start-up.

Startups can decide to have/not have a single non-compete agreement for every employee depending on their budget, business model, and personal discretion.  

Depending on the location of employers or companies in different jurisdictions, the law can be/can’t be enforceable. But different courts and laws of a land have different interpretations of this law and its enforceability still lies in murky waters as it comes with a lot of exceptions. There’s an open consensus of providing employees something of distinguished value that’s not usually provided by others in exchange for a non-compete clause to be enforceable, startups can fail somewhere in providing such unique valuable benefits like insurance, parental leaves, and telecommuting options. Also, grave matters of keeping competitive and value-adding skills, execution know-how, and expertise of an employee away from the market for too long changes the legal enforceability of a non-compete agreement.

Topics: Human Resources

Originally published July 12 2019,updated September 14 2019

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