Non-Compete Agreements for Software Development: Should You Do it?

When it comes to protecting a company’s valuable information, data, procedures, and ideas, it’s essential to take any precaution necessary. At the same time, some of these precautions could prove to be unnecessary in some situations and even damaging in other scenarios. 

This will be no different when looking to add a software developer or development team to your project. A non-compete agreement can bring plenty of benefits to the development of your software, but whether or not you should have one signed will depend on a variety of things. 

Are non-compete agreements allowed in your state?

First, you’ll have to check with your state’s laws and regulations since they will vary from state to state. For example, states like California, North Dakota, and Montana have banned non-compete agreements for any employees. Other states like Tennessee, Texas, and Delaware allow them for everyone except physicians. 

If a non-compete agreement is allowed in your state, you’ll want to start looking at the different pros and cons of having your software developers sign one. To do this, you’ll want to look at it from both sides of the table — the company’s perspective and the developer’s perspective. 

Will the company benefit from a non-compete agreement?

The short answer is yes; the company will benefit from having a developer sign a non-compete agreement. Nevertheless, it can also cause some downfalls if not done correctly. Let’s first take a look at three main advantages of a non-compete agreement for the company:

1. Confidential information and secrets won’t get leaked or used against you when the job is complete
2. Developers won’t have the opportunity to steal your customers once they stop working on your project
3. A non-compete agreement might give your developer reason to keep a good relationship with you for an extended amount of time

Like we mentioned earlier, there may also be some negatives to a non-compete agreement for the company. Let’s take a look:

1. If the agreement is introduced after the developer has already started to work, it could make them rethink working for you
2. The company runs the risk of facing legal issues down the road if the agreement isn’t honored
3. Developers might choose other projects over yours if they have offers without a non-compete agreement

The company will have to weigh these pros and cons when making a decision. If you’re willing to risk having fewer developers to choose from, in return for more confidentiality, then you’ll want to consider introducing it.

Will the developer benefit from a non-compete agreement?

Ensuring the company is getting what it needs out of the agreement is essential, but they should also be taking the developer’s needs and wants into consideration. 

Let’s take a look at some of the reasons a developer will appreciate a non-compete agreement:

1. The developer knows that by signing one, they are signaling to the company that they’re invested in their project and ready to work
2. The developer will have an opportunity to negotiate the agreement, so they are more open to it

Next, we’ll look at some of the cons:

1. Some developers will elect to have their lawyer read the agreement before signing, which will cost them extra money
2. Could cause a delay in finding work in a similar industry once the job is complete

The developer will certainly have some advantages and some disadvantages when signing a non-compete agreement. Since they will likely consider it on a case-by-case basis, the company requesting it should do the same. 

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What if I decide to introduce a non-compete agreement to software developers?

If you end up deciding your company will require a non-compete to be signed, you should ensure that it contains several valuable pieces of information. We’ll break it down into five things every non-compete agreement should contain. 

Let’s take a look:

1. It must define what working for a competitor means since this will vary company to company
2. It must specify the amount of time the developer is to refrain from working for a competitor
3. It must identify the geographical area being covered
4. Will there be a payout clause or incentive for the developer fulfilling the agreement?
5. Will the non-compete agreement be honored if the developer is terminated before completion?

There will be a lot to consider, but there’s no doubt that your company can benefit from a non-compete agreement. Just remember that it will cause limitations when hiring and retaining developers to work on your project.

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Photo by Vitalii Vodolazskyi on AdobeStock