Your business is your most important asset. As a business owner or manager, you are responsible for keeping the company profitable. You want to do everything you can to protect your business. One of the things you can do to take a proactive approach is to use a non-compete agreement. A non-compete agreement can ensure that employees you hire will stay true to your company and will not take confidential information with them when they leave. You will want to consider the advantages and disadvantages of a non-compete agreement before you decide on implementation.
What is a Non-Compete Agreement?
A non-compete agreement is a contract between an employer and employee that specifies how and when an employee may leave the company to take a position with a competitor. The agreement may be part of a larger employment contract or it may be separate. The non-compete is designed to protect employers from employees from taking important company information or trade secrets with them to another similar company. It may also prevent them from starting their own similar business or becoming a contractor. The agreement typically includes details that prevent an employee from taking or using particular information outside of the company. It may include a time period during which the employee is not allowed to work for a competitor’s company after leaving employment.
Benefits of a Non-Compete
A non-compete agreement provides employers with some assurance that their employees will stay with the company for a long time. When you need to invest in specialized training and give employees access to classified information you want peace of mind that your efforts will not be for naught. A non-compete agreement allows you to share confidential information with employees without fear of them taking the information to a competitor. With a non-compete in place you can invest in your employees so they will have the knowledge they need to help make your business successful.
Potential Pitfalls of Using Non-Competes
Non-compete agreements are useful when you have trade secrets you do not want employees to divulge or when you need to protect business contacts and professional information. However, companies should avoid some of the common pitfalls of non-compete agreements:
- If you require a non-compete it could prevent some quality applicants from accepting positions in your company.
- If a non-compete is not well-written or includes some questionable clauses, it could be unenforceable.
- A non-compete that covers too lengthy a period may also be difficult to enforce.
- Enforcing a non-compete requires some time and effort. If an employee decides to challenge enforcement it could result in lengthy and expensive litigation.
Enforcing Non-Compete Agreements
If you are going to utilize non-compete agreements you should be prepared to enforce them. If you fail to enforce them, they are not useful. You should have a plan in place to monitor for employees who break the contract. Review the contract often and make adjustments as needed before you have new employees sign them. Be prepared to take legal action should an employee breach the agreement. Sometimes a warning letter directed to the former employee and their new employer is all that it takes to resolve the issue. Sometimes, an employee will take the matter further and this will require further legal assistance.
Contact our legal team at Moen Sheehan Meyer, Ltd. to find out more about non-compete agreements. Call us at (608) 784-8310 or contact us online for a consultation.