It is truly rewarding to write an article which
foments discussion… and it doesn't matter
whether we agree or disagree, simply that we talk
about something which might be important to your
business. However, the end result of a non-compete
discussion should not necessarily be to foist one of
these agreements on every employee. Rather, it
should prompt you to think through which of your
long-time key employees (or new hires) are in a
position to harm your business if they leave tomorrow
and join or open a competing company.
Wouldn't it be safer and simpler to have everyone
just sign one?
Actually, no, and such a strategy would probably not
produce what you want, which is a reasonable
agreement that balances your need to protect your
business with the need of a departing employee to
make a living. You want an agreement which is
enforceable for an agreed-upon period of time, and
that restrains a "key" employee (I'll come back to this
definition) from taking everything you have shared
with him or her about your business and clients. Such
an agreement does not apply to everyone.
So, who should sign one? Let me answer
that by giving you an example…
Suppose you run a marketing and communications
firm. You have 25 employees, 20 of whom work day
or night shifts running printing equipment which
produces snazzy brochures and colorful marketing
pieces. Three of the employees are office staff; two of
them are sales people who call and visit your
customers every day.
In this example, the only employees who are
"key" are your two sales people. They (and only
they) have access to everything you want protected
in your business: Sales and pricing information,
customer lists, terms of sales with those customers,
etc. You get the picture.
If you attempt to have all your folks sign a
non-compete agreement, you will overreach, cause
confusion and concern among the majority of your
staff, and may actually undermine the enforceability
of an agreement with your two key employees.
(Note that a non-compete agreement is usually only
one part of a larger agreement which protects the
confidential information of your company. In the
example above, you may want the staff person who is
your controller to sign a confidentiality
agreement. This won't contain a non-compete, but it
will require that your departing controller not blab
your business all over town.)
What should they sign?
Non-compete agreements can and should be
tailored to fit both the specific job description as well
as that which is confidential about your particular
company.
A few key portions of such an agreement would
include:
- an agreement by the employee to protect and not
disclose the confidential information belonging to the
company and, possibly, its clients or customers;
- an agreement by the employee not to solicit any
clients/customers or employees of your company on
their way out the door;
- an agreement by the employee not to compete
with the company in a number of carefully-defined
ways; and
- an acknowledgment by the new hire that he or
she has no non-disclosure, non-solicit or
non-compete restrictions with a previous employer.
In addition, in asking a key employee to sign a
non-compete, you must be sure to offer the employee
"consideration," i.e., something of value at
signing. For the new hire it's the job itself. For the
current employee, on the other hand, it may be a
promotion, bonus, extra vacation, etc. The key is that
it offers value (be sure your non-compete agreement
states what the consideration is).
In summary, think this issue through in the
context of your own business, and above all, be sure
you need an agreement to begin with. If you do,
be sure it is tailored to fit the situation and signed
only by the key employees.
P.S. If you think this topic doesn't have broad appeal,
just Google "non compete agreements" and start
sorting through the 249,000 listings!
