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Non-compete Agreements and Covenants for Global Teams

Unsure how to incorporate non-competes into your global hiring strategy? Learn how to implement and enforce them internationally while remaining compliant

Jemima Owen-Jones
Written by Jemima Owen-Jones
April 18, 2024
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Key takeaways

  1. Non-competes block employees from joining direct competitors or establishing rival companies for a set period.
  2. Hiring teams may struggle to comply with diverse labor laws concerning non-competes or enforce contracts across different jurisdictions.
  3. Outsourcing compliance to a global HR solution like Deel can help you navigate non-competes and other types of covenants.
Non-compete agreements are make-or-break for many global enterprises. Without these protections, they risk losing essential trade secrets and proprietary information.

However, ensuring compliance with diverse labor laws can be challenging. Many countries have specific regulations or ban these agreements altogether. Even if you can develop a working agreement, HR teams must enforce it across a remote, distributed workforce. 

Our article explores everything you need to know about global non-competes and post-contractual agreements. Continue reading to discover how they work, how to implement and enforce them, and the good best practices. 

What are non-competes?

Non-competes are clauses you include in employment agreements to protect your business interests. They restrict what your team can do during and after employment within a set timeframe. Such agreements are reasonably common practice, with around one in five workers saying they have an anti-competition clause in their contract.

Although agreements can vary between companies, standard non-compete agreements usually prevent workers from:
  • Joining a direct competitor
  • Starting a similar business
  • Using sensitive information
  • Poaching customers or clients
  • Recruiting former colleagues

By restricting employees in these ways, you can avoid valuable business assets falling into the hands of competitors. That means you can maintain a competitive advantage in the market. 

Non-competes also deter rival companies from poaching your best workers. As a result, you have fewer skills gaps and lower turnover rates. Teams are also more cohesive when you have higher employee retention levels

If you invest in learning and development, non-competes ensure you’ll reap the benefits. Workers can’t join your business to get a foothold in the industry and leave once they’ve got more experience and qualifications.

Non-compete laws around the world

Many governments have specific regulations concerning non-compete agreements. Companies must ensure their employment contracts comply with all the relevant laws where their workers are based.

Here are some noteworthy examples of non-compete laws:

  • Brazil: Employers may be required to compensate workers for the duration of the non-compete agreement
  • The US: As there are no federal laws about non-competes, they’re regulated at the state level. Some places have banned them altogether, like California and North Dakota
  • The UK: Although these contracts are allowed, businesses must demonstrate that each non-compete case is in their best interest
  • India: Companies can only enforce non-compete clauses for the duration of the employment contract
  • Australia: Courts may assess the reasonableness of a contract and amend sections if necessary
  • Spain: Non-competes are valid for up to two years after a worker has left the company

While these examples demonstrate how varied the laws can be, they don’t give the full picture. Some countries allow non-competes but lack the infrastructure to enforce them. Others have adopted a more relaxed stance but consistently pursue legal action against offenders.

Ultimately, global companies must research every country where they hire to ensure contracts are both legal and enforceable.

The importance of non-competes for global teams

Multinational corporations often can’t operate without non-compete agreements. They’re particularly susceptible to the risk of workers leaving for direct competitors or starting rival companies.

Today’s global companies tend to be remote. That means employees can accept jobs with competitors just by answering a few emails. They don’t have to worry about moving costs or uprooting their families.

The reverse is also true. Rival companies can easily find and solicit employees through professional networking sites like LinkedIn. They don’t have to search for their contact details or approach them in person.

Once employees have decided to leave, they can easily copy or move digital assets. All they have to do is duplicate files containing your workflow, strategies, and customer data.

Comprehensive non-compete agreements can mitigate all these risks. You can be sure employees will remain loyal despite your limited oversight. If you’re a small global business, this can give you a chance against large companies that can outbid you on salaries.

The challenges in implementing global non-competes 

While non-competes can solve issues for international companies, they create new ones. Here are some common challenges:

  • Time-consuming processes: HR teams must research and stay updated with complex and ever-changing labor laws. They also have to distribute the non-compete agreements, negotiate terms with candidates, and collect their signatures — potentially from different locations and time zones
  • Greater compliance risks: If businesses violate laws concerning non-competes, they can incur penalties and face legal action
  • Unenforceable contracts: Contracts may be void due to the local laws or lack of enforcement in certain countries. This leaves your company still vulnerable to risks
  • Mobile workforce management: If you have digital nomads, agreements must comply with all the local laws of the places they wish to work
  • Lower morale: Some employees view non-competes as an unfair practice. Introducing these clauses may damage their trust and reduce engagement levels
  • Clashing attitudes: Diverse teams may have opposing ideas about their rights and responsibilities as employees. Developing a consistent set of policies for them may be challenging 

How to implement and enforce a global non-compete 

Considering all these challenges, it’s best to develop a process for implementing global non-competes that protects both you and your workers. Here is a step-by-step process you can follow:

Step 1. Research the case

Research the laws of the country where the employee intends to work. It’s essential to ensure there are no local regulations that would invalidate any anti-competition clauses.

Consider whether the scope of your agreement genuinely protects business interests. If they’re overly broad, you may face legal action. For instance, Boston Beer is at the center of a public dispute because staff have been unable to work since leaving.

Step 2. Draft the contract 

Draft the contracts with the help of your legal team. If you lack the in-house expertise, consider outsourcing to an HR compliance solution like Deel. We localize contracts for both employees and freelancers across over 150 countries worldwide.

Clarify exactly what the candidate can and can’t do under the terms of the agreement. For example, how long are your non-competes enforceable? Do staff get paid during that time? 

Step 3. Review the agreement

Arrange for the candidate and their lawyer to review the employment contract. Where necessary, translate the document into their first language so they can fully understand all the terms and conditions. 

If it’s not stated in the document, explain the purpose and possible implications of the non-compete clauses. Candidates may be more willing to sign when they see why they’re necessary. Even if they ultimately decline, they may have a more favorable opinion of your company.

Step 4. Negotiate the terms

Allow time in the interview process for the candidate to raise concerns and suggest changes to the non-compete agreement. You may be able to reach an agreement.

Train hiring teams about cultural differences in negotiation styles and legal expectations. It will help these discussions run smoothly. For example, German candidates may be more skeptical about non-competes given all the country’s restrictions — recruiters should prepare to be more flexible with the terms.

Step 5. Collect the signature

Have candidates sign the contract once they’ve agreed to all the terms. If they can’t visit your office, use a secure digital platform to collect the signature.

For instance, Deel allows you to manage documents via our centralized HR compliance platform. All employees have to do is sign in and verify their identity. You can check who’s read and signed contracts via the dashboard so you know when to proceed with the next stage of onboarding.

Step 6. Enforce the agreement

If you believe an employee has violated their non-compete, you may take legal action. Always document any evidence of breaches and consider whether your response is proportionate. 

It’s best to avoid letting it reach this stage. Establish an internal process for resolving disputes over non-compete agreements. Offering a fair and transparent path to settlement can maintain goodwill with former employees and protect your reputation.

Also, provide ongoing training to help teams understand their commitments. Occasional Q&A sessions can explore what’s acceptable under the terms of the agreement and resolve any misunderstandings. You can also outline your policies in your employee handbook and make it available via your online knowledge base.

Best practices for implementing global non-competes 

As you navigate global non-competes, there are some practices you can consider to guarantee their success.

  • Tailor contracts to mobile workers: Learn where employees are planning to relocate. You can draft agreements that comply with multiple countries so you can continue to enforce them
  • Limit non-competes to sensitive fields: Assess the impact of certain positions leaving for direct competitors. Only include non-compete clauses in their contracts if it’d cause significant damage to the company
  • Impose a salary threshold: Higher-paid workers are more likely to know trade secrets or possess critical skills. By setting a salary threshold, you’ll only apply the non-compete to individuals whose departure would genuinely affect the business
  • Apply clauses consistently: Unless you have good reason, use the same contracts for employees in similar roles and locations to avoid claims of unfair treatment
  • Stay updated with relevant laws: Monitor ongoing changes in all the countries where you hire. You can use Deel’s Compliance Hub to get notifications about any new legislation regarding non-competes and similar covenants 

Alternatives to global non-competes 

What can you do if workers live in a country where non-competes aren’t enforceable? There are similar types of contracts that can prevent or discourage them from competing against your business.

Non-disclosure agreements (NDAs)

Including a best practice NDA clause in employment contracts deters workers from sharing trade secrets and sensitive information. While these contracts won’t keep employees from leaving, they ensure rivals won’t benefit from other valuable business assets.

Businesses often use confidentiality agreements interchangeably with NDAs. These are broader in scope and may refer to how employees use and handle sensitive information and intellectual property. For example, non-disclosure clauses often contain policies about data security.

Non-solicitation agreements (NSAs)

NSAs prevent former employees from approaching your current customers and clients. That means you can protect your revenue sources without limiting your team’s options. However, it can be challenging to prove there was a breach of contract — workers might claim your customers contacted them instead.

Garden leave

If you want to prevent employees from joining competitors at critical moments, consider garden leave. This policy allows employees to stop working for the company but remain on the payroll. 

Garden leave may block your team from entering the job market for a long period. As you continue paying their salary and benefits, it can be a costly and resource-intensive solution. You may prefer to use it for select cases.

Loyalty programs

You can incentivize employees to remain at your company for a set period by offering them perks and benefits. Sometimes, we call these ‘retention bonuses’. The rewards could be a pay raise, one-off payment, shares in the company, or a promotion.

As loyalty programs reward rather than restrict, they may be more popular among employees. They’re best used alongside other covenants, though, as they don’t prevent staff from working for competitors or disclosing information.

Training repayment agreements (TRAs)

Businesses can require employees to repay the cost of training under a TRA. The idea is that they remain at the company for a set period in exchange for learning and development opportunities.

However, TRAs are a controversial practice in some countries. The US Federal Trade Commission (FTC) is considering whether they count as a non-compete as they restrict where people can work. You have to be confident the training isn’t required for the job. 

Handle non-competes with ease using Deel

Nothing’s more frustrating than approaching a great candidate only to discover they can’t accept your contract. However, global companies can find it a common problem when hiring abroad.

Deel makes sure you never miss an opportunity. We include non-compete, non-disclosure, and other essential covenants in all our contracts and tailor them to local laws. New hires can view the document and sign via the centralized dashboard so no time is wasted.

Want to learn how Deel can support your global hiring strategy? Book a demo to learn more.

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