Lunar International College School of Graduate Studies Department of Master of Business Administration Human Resource Management (MBA 614) Assignment on Non-compete agreement Presented By 1. Ephrem Wolde 2. Dahlak Shiferaw 3. Marshet Tsegaye 4. Tayech G/Michael 5. Simeneh Getinet Submitted to: Habtamu A. (PhD) December 24, 2022 Addis Ababa, Ethiopia Introduction Companies are concerned about the turnover of high-potential personnel. To protect themselves, some organizations require all employees to sign non-compete agreements. These contracts make it difficult for them to work for a competitor after leaving the organization. Ex-employees may be prohibited from sharing system, process, or product information under a non-compete agreement. These contracts are widely utilized throughout the country. According to surveys, approximately one out of every five Americans is currently bound by a noncompetition agreement. Is it ethical to enter into non-compete agreements? Should a company force all employees or only high-potential employees to sign them? What issues could develop if non-compete agreements are used? There are several advantages to using these contracts due to their structure. They safeguard commercial information, trade secrets, and intellectual property. They also prevent ex-employees from negatively competing with your company. Despite the fact that non-compete agreements are detrimental for businesses, workers, and the economy, they limit a previous employee's freedom to make career and professional advancement options. Even though Families suffer because it limits their opportunities to earn money and exercise their independence. It is morally permissible if a non-compete agreement bans a worker from using a previous employer's secrets against them. However, applying such a limitation to terminated employees would be unethical. The employee is not entitled to any damages as a result of the employer's action-based proof that the employee's task was useless. As a result, it is risky and detrimental for both parties, and such agreements should be prohibited. Is it possible to replace non-compete agreements with alternative HRM practices in order to retain high-potential employees? Yes there are other agreements which can replace a non-compete agreement. These are non-solicitation agreements, non-disclosure agreements, and restrictive agreements can be used in place of a non-compete agreement. Each of these activities, in its own way, hinders a former employee's ability to compete with the employer. Non-solicitation agreements limit a worker's ability to approach clients or employees of past companies. Ex-employees are prohibited under non-disclosure agreements from releasing confidential information obtained while working for the company. Furthermore, restrictive covenants restrict an employee's capacity to work in a specified location or field after leaving the company. 2|Page Retaining key employees in an organization is a key factor in the success of any business. It can be achieved through a variety of ways. Firstly, ensure that you provide competitive salaries and benefits to reward and motivate employees. Secondly, create an open and supportive culture with strong communication between staff and management. Encourage employees to share ideas and provide feedback. Thirdly, keep employees engaged by providing them with growth opportunities within the organization. Finally, provide recognition and rewards for employees who outperform. By implementing these strategies, you will be able to successfully retain your key employees and build a stronger, more successful organization. Recommendation Non-compete agreements should each be carefully examined. They can shield companies from dishonest rivalry and intellectual property piracy. They may, however, also discourage innovation and restrict employee mobility. Because they unintentionally obstruct others' work, employees can also be a source of irritation and a lack of job satisfaction. Therefore, even though they have the potential to be advantageous to businesses, non-compete agreements need to carefully balance the needs of employees and other stakeholders. Reference https://medium.com/@peter.gassner/non-competes-are-bad-for-employees-and-the-economy https://www.gg-law.com/blog/2020/07/the-pros-and-cons-of-non-compete-agreements/ 3|Page
