To Compete or to Non-Compete

In building a small business, owners work hard to network and develop a customer base that creates repeat business and referrals from satisfied customers. Owners grow their business and hire employees to make sales or provide services to those customers. To be successful, employees develop close customer relationships, so what happens when an employee voluntarily or involuntarily leaves their employment?

The owner may be able to protect their customers and other confidential information, if the employee is bound by a covenant not to compete. Such a covenant must set reasonable limitations as to time, geographical location, and the scope of activity to be restrained. If these limitations are unreasonable the covenant could be changed by a Court or be unenforceable.

In addition to reasonable limitations, the employee and employer must make mutual promises related to the covenant. For example, the employee promises not to disclose confidential information, solicit employer’s customers, or help a third party solicit customers.

The employer must also promise to deliver something of value, this can be monetary (more than wages), but also can be industry training, access to confidential information, and/or other valuable job specific consideration.

These and other important provisions must be carefully crafted to provide your company the best protection for your confidential information and customers.

If you are using a non-compete, or think you may need one, please contact us to review the best way to protect your hard-earned customers.