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WHY A NON-COMPETE AGREEMENT?

How do you protect your investment of time, effort and money on training employees and preventing them from leaving with your confidential contacts, processes and information?

You need a non-compete agreement when you share ideas and business practices with employees, partners, and contractors, when an employee with access to trade secrets leaves your company, either because the employee quit or has been fired, because the employee could take this information and use it to personal advantage. A non-compete agreement helps make sure the people you work with, don't wind up becoming (or working for) the competition. Briefly, a non-compete agreement means that an employee will not compete with their ex-employer.

Obviously, a non-compete agreement can keep your business from losing employees, but it can also protect your company's confidential information.

This agreement is a document used to protect employers from partners, employees, contractors, and other individuals with access to their business secrets and practices using that access to leave the company to start their own competing business in the same industry. By signing a non-compete agreement, an employee agrees that they will not go to work at a rival company if they quit.

This agreement contains essential elements.  Here are some of the key provisions:

  1. The effective date of agreement (the date on which the agreement will start protecting the protected party against the non-competing party's working as a competitor, or for a competitor, of the protected party);
  2. Names and addresses of parties involved;
  3. Time period for non-compete agreement;
  4. Geographic location, where the non-competing party is prohibited from engaging in competition with the protected party (this may be one particular location or within a specific distance from a named city or you may describe the geographic location in detail);
  5. Specific activities and subjects included in non-competition (activities and industries that the non-competing party must not engage in under this agreement. The prohibited activities should be limited to those that are essential to the protected party's business practices);
  6. Compensation (is the amount of compensation that the non-competing party will receive in exchange for entering into the agreement);
  7. Individuals who will be signing the agreement (this should be limited to people who have authority to sign the agreement and have it be binding on the business entity or individual).

   Forwards, we will present ten reasons why businesses should use non-compete agreements:

  1. Non-compete agreement is used to protect privileged information from disclosure, which can promote innovation;
  2. Employees may not leave as quickly, thus giving the employer some protection of the investment put into the employees;
  3. High-performing former employees will be far less likely to put their skills to use with the competition;
  4. Enhance the value of your company if you think you may sell someday;
  5. Protect your investment in training (training employees is a worthwhile expense, and the training resources you provide may even help you to attract talented employees);
  6. Protect your customer relationships;
  7. Enhance client confidence;
  8. Shape ground rules for potential litigation;
  9. Deter competitors from hiring your employees;
  10. Preventing unfair competition.

In short, there are some advantages using non-compete agreements that may not be apparent until it is too late. Small business owners should think about protecting their business in advance. 

It takes a knowledgeable attorney to draft an agreement that benefits your unique business, playing to its particular strengths and helping to overcome its unique challenges.

If you want to avoid having employees quit to start their own competing business, or steal your client lists and join a competitor, we suggest that you use a non-compete agreement.

If you would like to start using this tool, feel free to contact us and we do our best to shield you from risk with a non-compete agreement.