Non-Compete Agreements in Business Sales (Part 3 of 3)

Non-Compete Agreements in Business Sales (Part 3 of 3)

Articles, Non-Compete Agreements, Small Business

The Contents of a Well Drafted Non-Competition Agreement

What Can You(the Employer) Include in a Non-Compete Agreement?

Non-competes are often mis-understood and viewed as dreaded creatures designed to punish or put people out of work. But they need not be so fearsome. They can be simple and fair. Remember the purpose is not that complicated. It’s to prevent a former employee (or independent contractor) from hustling your customers. It should be designed to give you time to readjust and keep your customers in the fold without interference or stress from a disgruntled former employee.

Non-compete agreements may include four restrictions:

  1. no solicitation of current customers,
  2. no competition for new customers (within the non-compete area),***
  3. no employment by a competitor
  4. no solicitation of the your employees, and
  5. non-disclosure of confidential information.

***If you terminate an employee without cause (2) cannot be enforced.

Can you get damages for violation? Yes, but proving them may be very difficult. So, the critical element of any non-compete is the right to stop the violator, quickly. A well written non-compete should allow you, the employer, to: (1) swiftly obtain a court restraining order stopping the violator and, (2) have the violator pay your cost of enforcing the agreement. Lastly, be certain that your non-compete agreements includes a penalty that extends the non-compete period if there is a violation. It may take time for you to discover the violation and the violator may just stall you to see if he can run the clock out. The extension penalty prevents the violator from using your time against you.

Use a reasonable time and distance. Don’t be greedy, and explain the purpose to your employee/independent contractor. Caution to you: forms from the internet are not your friend. Non-completes are not expensive and can be drafted by an attorney to fit your business.