I recently heard from a labor attorney that non-compete lawsuits are on the rise. He has several companies on his desk suing former employees for taking clients after they separate from the company. I asked him if that was related to the issues with the economy and if companies are trying to hold on to what they can and was surprised to learn from him that it occurs in upward and downward times. He stated that in his opinion, when times are good, sales people seem to be more willing to take a larger risk. I have a lot of clients who often say to me “We don’t do non-compete agreements because they won’t hold up in court.” My response to them is simply “well if you don’t have one at all, that certainly won’t hold up in court.” That said, here are a few things to think about if you are interested in giving your company some added protection to others encroaching on your territory!
1. Non-competes should be done at the time of hire. This means if you offer someone a position with your company, you need to do it right away and make sure it is part of the interview process and they know this is contingent upon their employment.
2. If you have employees in place, and you didn’t start thinking about this process until your staff is hired and you would like to implement these types of agreements, you will need to offer “consideration” AKA “money” to sign the agreement. If you don’t offer consideration after they are already employed, courts will normally ignore the agreement.
3. Know who should sign an agreement. If you have trade secrets and proprietary information that you would like to protect that most employees have access to from a broad standpoint, then most certainly make this part of your everyday new-hire process at the time of hire. If you are only concerned about a select few employees in sensitive roles, then you may want to limit the agreement to those folks. If you don’t have a good reason for certain employees to sign this type of agreement, make sure that you think through that.
4. If you have a current or former employee that you who has violated this agreement, contact a labor attorney right away who can help you through next steps. I have seen sudden injunctions where employees have been stopped immediately in emergency cases and having a great attorney on your side can make all the difference between you and loss of revenue to your business.