Your employees should be your company’s greatest asset, but under some circumstances they can quickly turn into liabilities. As an employer, there are many steps you should take to mitigate the risk of employees or former employees causing irreparable harm to your company.
One of the most useful tools to help you mitigate that risk is the Non-Compete Agreement.[1] This is a contract signed by your employees that restricts their ability to go to work for competing businesses, limited to a specific area of work, geographic region and period of time, after they leave your company. Here are four of the key benefits of having your employees sign non-compete agreements:
1) Safeguard trade secrets and other intellectual property
More than anyone else, your employees have access to the most sensitive aspects of your business. They have intimate knowledge of how your company runs and what you do to achieve success. And most of all, they gain insider knowledge of the intellectual property that is the heart and soul of what you do. Certainly, IP protections like copyrights are essential and provide a shield to protect against those who would seek to steal your ideas and innovations, but they do not prevent your former employees from working for competitors and providing them with essential knowledge of the systems, processes and customer lists that could help them duplicate your work. Non-compete agreements ensure your employees cannot put their knowledge of your intellectual property to work for a competing business.
2) Prevent competitors from prospering from your hard work
A great deal of time, money, and effort goes into effectively preparing and training your employees to work in your industry or profession and to excel in your company. You might even pay for educational costs for your employees. No one wants to commit so much to a person who can simply leave for a better salary offer from a competitor once you’ve helped them acquire the skills they need to be desirable to other companies. A non-compete will help ensure that your competition cannot prosper from all of the resources you put into turning your employees into assets.
3) Prevent “poaching”
You have probably committed a significant amount of time and money to developing an incredible workforce. Having your employees sign non-compete agreements will disincentivize your competitors from actively attempting to poach your employees away from you. Businesses spend millions on recruitment, sending headhunters to entice employees to leave their current position and join them. Non-competes make it much more difficult for an employee to be recruited away from your company by competitors.
4) Protect you from disgruntled employees
A disgruntled employee is a dangerous employee.[2] If someone is unhappy with your company for any reason, whether the person was snubbed for a promotion, dislikes a supervisor, or was terminated from the company, the person may have incentive to do damage to your business. Some employees may be disgruntled enough to actively cause harm to your business by assisting your competition. A non-compete, along with tools like confidentiality agreements, will help to prevent this outcome and enable you to fight this conduct when employees leave your company under less than positive circumstances.
Non-compete agreements are incredibly beneficial tools, but ensuring that they are enforceable is a challenging, nuanced process which requires the knowledgeable input of a skilled business attorney. If you are considering utilizing non-compete agreements for your employees, or you would like to have existing non-competes reviewed to ensure their enforceability, please do not hesitate to contact the law firm of J. Muir & Associates today!
Why should I require my staff to sign a non compete agreement?
Do I really need to make my employees sign a non-compete agreement?
- My former employee is competing against me using my trade secrets What can I do?
- I suspect a key employee is stealing from my business What can I do?
Other articles:
- Pros and Cons of Using a Term Sheet
- Keep It Secret, Keep It Safe: How to Protect Trade Secrets with a Nondisclosure Agreement
