More and more employers are asking their HR staffs to prepare noncompete agreements to prevent employees from taking trade secrets to competitors. Before you pull out a standard form or download one from the Internet, consider the consequences.
Noncompete agreements are contracts that bind both parties to their terms. Courts frequently hold employers to the letter of the agreement, even if it becomes clear that whoever prepared it didn’t clearly understand the terms.
That’s why you should always have an experienced attorney prepare or review noncompete agreements before anyone signs them. Your lawyer can explain all the terms and make necessary changes to better protect the company.
Recent case: Roger Bannister worked for packaging manufacturer Bemis Co. as technical and product development director. He signed a confidentiality and noncompete agreement several years after starting the job.
The agreement said Bannister could not work for a competitor for 18 months after termination—but also included a promise that Bemis would continue to pay his salary if he was unable to obtain employment after a “good faith and aggressive job search.”
He quit and attempted to take a job with one of Bemis’ competitors. Bemis blocked that move, citing the noncompete, so Bannister demanded compensation. He sued and won.
Bemis appealed, but the 8th Circuit ruled that the agreement was clear: Bemis had to pay Bannister’s salary for nine months until he found a job. (Bannister v. Bemis, No. 08-1634, 8th Cir., 2009)