Two Ways to Protect Your Business with a Non-Compete Agreement
Non-compete and non-solicitation agreements are powerful legal tools because they place (reasonable) restrictions on what employees can do when they leave your company, essentially serving to help protect your business with a non-compete Agreement. (The average person will change jobs / companies 12 times over the span of their professional life.) In North Carolina, both types of agreements can be difficult to enforce in a court of law unless they meet certain legal criteria.
To be upheld by a judge in NC, generally agreements must be:
- in writing;
- a part of the employment contract;
- based on valuable consideration (which means that the employer offers something of value in exchange for the employee’s agreement);
- reasonable as to time and territory; and
- designed to protect the company’s legitimate business interests.
When in doubt about assembling an agreement which will stand up in a court of law, it’s best to talk with an experienced attorney who will be able to advise you on the specifics of each of the five requirements and draft agreements which will protect your business.
How do non-compete and non-solicitation agreements protect my business?
A non-compete limits the employee’s ability to compete with the employer for a set period of time after an employee exits the company. This can shield your business from losing trade secrets, operational knowledge, and other vital information to competitors.
Similarly, a non-solicitation agreement restricts an employee’s ability to solicit an employer’s customers for a set period of time after employment ends. Essentially, this keeps former employees from poaching your customers.
Given the interests these agreements protect and the obligations they impose, it is important for both employers and employees to seek legal counsel when making them part of the employer-employee relationship. After all, even businesses in NC who have incorporated these types of documents into the hiring process have lost in court when they find out the agreement is not valid, too broad, or doesn’t meet one of the five criterion for validity.
Protect Your Company’s Information
Non-competes will keep your former employees from working for a competitor and give that competitor a competitive advantage in the form of proprietary information, customer contacts, and other information vital to a company’s success. As a business owner, you’ve invested significant time and financial resources in hiring and training your employees—non-competes help insure that investment by preventing employees from exporting the benefits of that training to a competitor for a set period of time after the employment ends.
Keep Your Customers and Other Employees
Non-solicitation agreements are aimed to keep an employee from gutting your company on the way out the door. These agreements restrict an employee’s ability to poach, or attempt to poach, your business’s employees or customers. Losing one employee’s training and knowledge can make an impact on your business, but if they leave and also take your key customers or other members of your workforce, the effect could be devastating.
Given that non-competes and non-solicitations are the subject of frequent litigation, it is important that a company retain legal counsel to draft agreements that will be enforceable when evaluated by a court using the five factors listed above. At SeiferFlatow, we can draft non-competes and non-solicitations tailored to suit your company’s needs that are within the bounds of the most up-to-date case law, which gives your business the best chance of protecting itself in the event a former employee begins work for a competitor or starts their own company.