You spend weeks finding the right person for the job, then weeks, months, or even years training them on the ins-and-outs of your business to better develop their skills. Then one day they tell you they are “going out on their own.” Maybe they aren’t setting up shop just across the street in direct competition with you, but you fear that you have now created the ultimate competitor.
This is a fear of many small business owners. Even large corporations fear this of their top salespeople, tech developers, or engineers. There are steps managers can take to protect the valuable asset of a well-trained, highly knowledgeable employee, though, and minimize the risk of them using your investment against you.
Get a Non-Compete and Confidentiality Agreement
These agreements are just that — a signed piece of paper with an agreement on it and a couple of signatures. It will not physically stop a former employee from doing what they agreed not to do, but it does provide you with a form of recourse should they violate the agreement.
Non-compete and confidentiality agreements can be created at the start of employment, included in an offer letter or a statement of pay and benefits. They are commonly used when someone is leaving the company and a release from liability is requested from the employee and severance is paid.
Generally speaking, when an employer is asking a former employee to not-compete with them when they leave their employ, they pay for that. After all, you are asking someone not to work in their most recent field of work, for which they are highly trained. For this reason, they are most common at higher levels of an organization, where you stand to lose the most if a high level manager takes clients, client lists, or proprietary information with them and uses that material for their own gain.
When the Agreement Is Signed Is Important
Some states take the position that if the agreement is requested at the start of employment, agreeing to the job and level of pay offered at the start is part of the job, consideration has been paid. It is generally accepted that if a non-compete and confidentiality agreement is asked for mid-employment or upon termination, some sort of consideration must be paid, and there must be some sort of additional compensation for that agreement, as this wasn’t part of the original bargained-for exchange at the beginning of employment.
Creating an Agreement
These agreements should not be too broad. They should not be for an indefinite period of time, and they cannot encompass the whole world. For example, any related work in any part of the entire country will likely not be in the agreement. They certainly can cover specific company assets such as client lists and other proprietary information. They can cover development work the employee did during the employment such as specific programs and techniques. After all, the company already paid for that. It is tough to cover what is in someone’s head. So again, the confidentiality piece should not be too broad.
Non-compete and confidentiality agreements or clauses embedded in other agreements, such as separation agreements, can offer valuable peace of mind for both parties. They should be crafted in such a way that makes sense for the circumstances and unlikely to be construed as unreasonable and thus unenforceable.
If you need to create a document like this, or want help interpreting one before signing it, call a business attorney, like a business attorney in Montana, for more information today.
Thanks to Silverman Law Office, PLLC for their insight into non-compete and confidentiality agreements.