Non-Compete Agreements

Most employers forbid employees from competing with the company while they are on the job. But some employers also require employees to agree not to start their own businesses or go to work for a competitor after they leave their jobs with the company. These employers require their employees to sign agreements that say something like "I promise not to compete with the company after I quit or get fired" for a specified period of time. These contracts are called "Covenants Not To Compete" or "Non-Compete Agreements.

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Are non-compete agreements legal? Breaching a non-compete agreement

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Are non-compete agreements legal? It depends on the state you are in and what the agreement says.

In some states, non-compete agreements are invalid - because those states do not want to prevent their citizens from working for anyone they choose or from opening their own businesses.

Other states allow these agreements, because those states agree with employers who want to protect their businesses from competition from former employees. But even in these states, if the non-compete agreement stops the employee from competing at all, it will probably not be enforceable, because it is unreasonable. For example, if a salesperson has an agreement that says she can never compete with her former employer in any location in the United States, it might be invalid. On the other hand, if the non-compete agreement says that the worker cannot complete with her former employer in the same neighborhood for six months after the job ends, then that would more likely be valid. The bottom line: the less the contract restricts the employee, the more likely it is to be legal.

If you are not sure whether the non-compete agreement you want your employees to sign is valid, you should check with a lawyer who specializes in employment law.

Breaching a non-compete agreement If your employee has signed a non compete agreement and does not want to comply with it, you should contact an attorney who specializes in employment law to find out if the contract is valid in your state.

If the employee (or the "former" employee) violates a valid agreement, you can probably sue the employee and recover the money that you lost because the employee breached the contract not to compete. You might also be able to stop the employee from operating a new business or going to work for a competitor. If your ex-employee has violated the non-compete agreement, you should contact a lawyer immediately.

Copyright 2008 GotTrouble.com

Non-Compete Agreements

Henry Dahut is an attorney and marketing strategist who works with some of the largest law firms in the world. He is the author of the best selling practice development book, "Marketing The Legal Mind" and offers consulting services in the area of strategic branding and law firm marketing. Henry is also the founder of the legal online help-portal http://www.GotTrouble.com - the award winning site that helps people through serious legal and financial trouble.

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Non-Solicitation Agreements - Throwing a Protective Cordon Around Employees and Clients

Along with non-competition agreements, Non-Solicitation Agreements are the primary way in which companies protect their interests vis-a-vis former employees. Whereas a non-competition agreement restricts an employee from working for a competitor, a non-solicitation agreement allows him to work for a competitor but restricts his actions while there.

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When an employee leaves his job, he may be obliged to sign a Non-Solicitation Agreement (or a separation agreement that contains both non-solicitation and non-competition provisions), in which he agrees, for consideration, not to solicit either his former colleagues or his former clients to leave the company partnership in question. Former colleagues and clients are the most commonly cited groups, but vendors, suppliers, and other types of business partners may also be included in the scope of the agreements.

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The purpose of such an agreement is to protect the company's legitimate business interests. And indeed, current employees and client lists may well be legitimate interests. Then again, they may not.

The enforceability of Non-Solicitation Agreements often turns on their reasonableness. Certain agreements aim to prohibit all manner of contact between a departing employee and his colleagues, even social contact. However, these agreements are not typical, nor are they typically enforced to such a point. Similarly, some non-solicitation agreements cast a wide protective net over all manner of company property.

Client lists very often are considered trade secrets and thus worthy of protection, especially if the company spent considerable time and effort compiling the lists and they are not generally public knowledge. However, if the employee had a hand in the creation of the lists and would be professionally crippled not to be able to contact his former clients, then a company would be hard pressed to have its Non-Solicitation Agreement enforced. Such agreements would be deemed non-competition agreements and a restraint on trade, effectively handcuffing the employee.

Non-solicitation Agreements set out a specific period of time and a geographic scope. Thus, for example, the employee may not solicit his former colleagues and clients anywhere within 50 miles of the city of Dallas for two years from his date of termination. The higher the time limit and the greater the territorial scope-without showing a correspondingly compelling business interest, such as the fact that the client base is regional or national-then the less likely a court will be to enforce the Non-Solicitation Agreement.

The parties may negotiate over not only the consideration owed for the employee's signing this agreement, but also the trigger mechanism. The company will want the agreement to apply no matter how the employee leaves, whereas the employee will resist and argue that the agreement should apply only if he quits or is terminated for cause-not if he is let go without cause.

Meanwhile, an employee will attempt to carve out pre-existing clients from the agreement's scope and to cultivate his clients as friends, so that when the employee sends a former client an annual holiday card, the portion about his new job will seem less like a solicitation and more like an exchange of news between friends.

Good Non-Solicitation Agreements find that proper balance between protecting the legitimate business interests of a company and not unduly restricting an employee's right to work.

Non-Solicitation Agreements - Throwing a Protective Cordon Around Employees and Clients

Ross Yader is a Non-Solicitation Agreement Research Analyst for RealDealDocs.com. RealDealDocs gives you insider access to millions of legal documents online drafted by the top law firms in the US that you can download, edit and print. Search For Free at RealDealDocs.com.

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