Your noncompetes may not form ties that bind — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
  • LinkedIn
  • YouTube
  • Twitter
  • Facebook
  • Google+

Your noncompetes may not form ties that bind

Get PDF file

by on
in Employment Law,Firing,Human Resources

Your company’s success lies in its ability to protect what’s unique about it: If the competition suddenly offers the same thing at a better price, you’re in trouble. And that can happen in the blink of an eye if a key employee jumps to a competitor or becomes the competition.

That’s why it’s crucial to use noncompete agreements to prevent insiders from destroying what you’ve built.

A well-written noncompete will help keep good employees with you longer. Reason: When they can’t compete against you, they’ll tie their success to yours and will work even harder. But a noncompete is worthless if it’s drafted incorrectly.

A common mistake: Making every employee sign a noncompete. If you do, and an employee challenges you, a court may decide that you’re overreaching. Better to stick with noncompete agreements for key employees and leave low-level workers alone. A court will see that you carefully considered your needs and aren’t unfairly interfering with workers’ rights.

Do make sure, however, that all employees sign confidentiality agreements, which say that that they can’t divulge customer lists, marketing plans and other intellectual property to anyone outside the company. The mere existence of confidentiality agreements will make competitors less likely to raid your workers.

To be valid, your noncompetes must restrict ex-employees from working for competitors within a reasonable time limit and geographical area. Plus, it can’t be so narrow that it restricts people from pursuing a livelihood in their chosen profession.

How to make agreements stick

To give noncompetes bite, you must enforce them. Three ways to do that:

1. Remind departing employees of their obligations during exit interviews by showing them copies of their noncompetes.

2. Make it common knowledge in your business community—especially those that hire your exiting employees—that you use noncompetes.

3. File for an injunction if you know a former employee is working with a competitor in violation of the agreement.

Leave a Comment

Previous post:

Next post: