Trust Isn’t Enough
Protect your business with noncompetes and nondisclosure agreements.
When you have high-achieving employees, you generally trust them. And trust can be a wonderful thing—until it isn’t.
Ask any business owner you know about what can happen when an employee leaves. They are likely to tell you stories about what and who the departing employees took with them, and how devastating it was to the business.
If you aren’t protecting yourself and your business with employee agreements, your enterprise could suffer even bigger losses than just the departing employees. They could walk away with:
» Hard-earned customers
» Know-how they learned from you
» Confidential information
» Information proprietary to your business and the manner in which you do business
» Pricing information
» Partner relationships
» Intellectual property—and ownership rights to intellectual property
» Other employees
Employee agreements are used frequently in business, but we’re often surprised to find companies that use the “trust” method noted above instead of protecting the information they’ve worked so hard to build.
These agreements aren’t something you should create yourself—do get professional help. If you don’t have expertise in this area, it’s very easy to accidentally introduce loopholes and mistakes in the document that could make it unenforceable.
The only thing worse than not having this type of agreement is having one that isn’t enforceable. And, if it isn’t written correctly, if just one provision is unenforceable, a court may deem the whole thing totally unenforceable.
Establishing what your agreement needs to cover is a good place to start.
We all have them, and your hard work has earned them. Your agreement should state that the departing employee may not take or try to take those customers for a clearly defined period of time.
Your employees may not have known a whole lot about your industry when they joined you, but they probably do today. So much so that if they wanted to go work for a competitor or start their own thing, they’re in a much better position to do so than when you met them. Head that off at the pass … for a clearly defined period of time, at least.
Confidentiality and Nondisclosure
We all have confidential information that shouldn’t be disclosed to anyone about our business. That includes our customers, our pricing and our proprietary products and processes. Employees shouldn’t share that information while they’re employed, and they shouldn’t share it after they’re employed either. You don’t want someone downloading the entire client list and taking it with them.
Partner and Community Relationships
Maybe you have a partner that’s the only organization that does what you need doing and is, by virtue of agreement, only doing it for you. Examples are manufacturers that fill a niche, or experts who are the only ones in their field. A former employee shouldn’t swoop in and take that relationship.
If you have someone working on your paid time creating something for you, then it belongs to you … right? Don’t put your company’s intellectual property at risk. Cover yourself with an agreement that states that creations and innovations that are produced by employees on paid working time are yours.
What’s worse than losing one key employee? Losing two. Your agreement should also have a statement that bars former employees from soliciting other employees of yours—or, to take it further—actually hiring other employees of yours. It happens all too often. Chances are, if someone had an adult conversation with you about what they were trying to do, you might be a bit more inclined to work with them versus having them hire somebody out from under you.
There are just a few things to remember. You can’t make these agreements so restrictive that you’re actually inhibiting someone’s right to make a living. If you contest someone’s choices under a noncompete and it’s viewed as too restrictive, lawyers or the courts may throw out your objections.
In addition to employee agreements, you should think about your agreements with contractors, vendors and partners. Don’t many of the provisions we mentioned above apply to how these folks interact with your business too?
Don’t be paranoid, but do be smart. You’ve worked too hard to get here for someone to waltz in and then waltz out with your information as a shortcut to making it big for themselves.