In the business world of today, many small and large business owners have found two things to be readily apparent. First, your business is only as good as the people you have running it. Second, in order to stay competitive in the market, a business must be innovative. That is why it can be so damaging to your business’ bottom line when a key employee, former business associate, ex-sales representative, old distributor or part owner leaves your business but stays within the same field of work.
As a business, you invest countless hours and dollars cultivating your key individuals and entities. You train them as to the ways of your company. You show them the tips and tricks of your industry. You educate them in every aspect of the business. You open the doors of your operation and show them how and why your business is so competitive. Whether it is because you have an extensive customer list, a superior network of suppliers, some great new technology, or an innovative and cost saving way of running the operation, your key individuals and entities will probably be privy to it all.
So what is to stop them from getting a paid education from you in the business you worked so hard to build up and then go to your biggest competitor or, even worse, spend the money you paid them to build your biggest competitor? A Non-Competition Agreement, that’s what.
With all the information that your key employees probably have, they become extremely attractive and even more valuable to the competitors of your business. By putting a Non-Compete Agreement into place with certain key individuals and entities, you can allow your business some time to prepare for competition with someone who knows all your secrets and your bottom line.
A Non-Compete Agreement is a contract that restricts a former employee, seller, or distributor in their right to compete against you and your business for a specified duration. Generally, Non-Compete Agreements arise when there is a sale of a business, an employer-employee relationship, a sales representative, or a distributor. A Non-Compete Agreement that is: narrowly tailored; for a just and honest purpose; in place to meet legitimate interests; and supported by consideration; will be enforced in most instances.
Generally, a Non-Compete Agreement restricts an individual in a number of ways. First, it will restrict your former employee, business partner, sales representative, or distributor from working for certain companies or within a certain type of industry. Though you cannot be overbroad in your restriction of the individual, you can generally restrict them from entering into a position or field that is in direct competition with your business. Second, you can restrict them from soliciting business from your customers. You can also restrict them from working within a certain geographical area. The more areas that your company derives business from, the broader the geographic restriction may be. Finally, you can set a period of time during which the restrictions imposed upon the individual or entity may be enforced. The courts will generally enforce a Non-Compete Agreement for a longer time period against a seller of a business than an employee.
In short, a Non-Compete Agreement can prove to be an effective tool for your business in its fight to remain competitive in its field. Coupled with a Confidentiality and Non Disclosure Agreement, a Non-Compete Agreement can help make sure that the biggest assets of your business do not become its Achilles heel. If you would like to discuss whether or not a Non-Compete Agreement is appropriate and could help your business, or if your employer has asked you to enter into such an agreement and you want some legal advice on the issue, call us at the Gabriel Law Office, PLLC and we will be happy to spend some time with you evaluating whether and to what extent your business can be aided by putting a Non-Compete Agreement into place with key individuals and entities. Let us help make sure that legal issues aren’t an issue for you or your business.