How Do I Protect My Investment in My Employees?

Have you started your own business and realize you need to start hiring employees but worried about protecting your company? Here are a few options you have in making sure you are looking out for yourself and for the company, while also working to protect your investment in your employees.

business law

Non-Compete Agreement

A non-compete agreement is a contract in which one party, the employee, agrees not to enter into or start a similar company in competition against the other party, the employer. Non-compete agreements protect the employer by not allowing employees to work for competitive companies for a predetermined amount of time and in a specific geographical area after the employee/employer relationship has ended. These agreements also help with discouraging and preventing current employees from leaving the employer to work for a competitor. 

Non-compete agreements must contain certain elements in order to be a valid contract. Some of these elements include the purpose of the agreement, reasonability with the scope of the agreement and consideration to the employee signing the agreement. If an employee is found in violation of a non-compete, the employer then has the decision to decide how to enforce the non-compete agreement, usually with the assistance of counsel. 

Non-Disclosure Agreement

A non-disclosure agreement is a contract between a minimum of two parties, i.e. the employer/employee, that outlines confidential material, knowledge, or information that the parties wish to share or not share with third parties. This is exceptionally vital to protecting your trade secrets or any sensitive information you do not want to be shared with third parties or made public information. 

However, non-disclosure agreements are not just for employees. Business owners can enter into non-disclosure agreements with vendors, clients and contract workers as well. 

Non-disclosure agreements need to contain specific information, such as a list of parties, the confidential information and the reason the information is being disclosed, and a non-circumvention clause in order to be a valid contract. If a non-disclosure agreement is in violation with an employee, client, vendor, etc. then the employer can decide to enforce the agreement, with the assistance of counsel. 

Non-Solicitation Agreement

A non-solicitation agreement is a contract that an employee signs agreeing to not solicit the company’s clients, for their own benefit or for the benefit of a competitor, after leaving the employer. Non-solicitation agreements are essential to business owners, especially small business owners, to help protect the relationships you have with clients, vendors, employees, etc. and to prevent any loss investments with these relationships. Without a non-solicitation agreement, a past employee can swoop in on your current clients and persuade them to move their business to his or her new company because the employee knows your relationship with the client and can use that to their advantage in converting new business. 

Non-solicitation agreements need to require certain elements to be enforceable. Some of these requirements include a valid business reason for the agreement, a customer list that is worth protecting and the ability for employees and clients to leave voluntarily because a non-solicitation agreement cannot prevent this from happening. 

Protecting yourself and your business needs to be a high priority when hiring employees to work for your company. It is important to have at least one of the three agreements, if not all three agreements, as standard paperwork for all employees to sign. 

Here at SeiferFlatow, PLLC this is something that we can advise, draft and assist you with as you prepare to start hiring employees. If you are interested in scheduling a consultation to discuss creating any employment agreements, please give us a call at 704-512-0606.