Want More No-Compete?
Top 4 Questions Answered from You Cannot Compete: Why it is important to have a No-Compete Clause

 

What type of protection does a no-compete/covenant agreement give to my business?

• Prevents your employees from going after your clients
• Prevents your former employees going after your employees
• Prevents your employees from using your trade secrets, such as:

Flat-rate book
Marketing strategies
Recruiting strategies
Pay structures
Vendor pricing

What is the best way to approach asking your current employees to sign a no-compete/covenant agreement? 

Because I had an employee take a million dollar account from our company, it was pretty easy for the rest of our staff to understand the benefits of signing a no-compete. I would advise a business owner to take the time to thoroughly explain the agreement and use examples to demonstrate the importance of no-competes. Here are some important points to go over when discussing the agreement with your employees:

This agreement saves jobs – not only your job, but positions in other departments, such as the warehouse and office staff.

If people leave and then take the company’s clients, this takes revenue away from the business. In turn, this will impact a company’s ability to provide raises, bonuses, insurance, new equipment, trucks, training, and 401K opportunities.

If someone leaves and takes employees with them, the burden is left on the people who are invested in the company as a career.

This clause ultimately protects you. If Joe leaves and take Bob, Sally, and Larry with him, you are left working over-time to fill their duties.

I think it is up to each company to decide if they want to execute a no-compete individually or as a group.  We chose to sign no-competes as a group because everyone was aware of the incident that prompted a no-compete clause.

Remember: A no-compete does not prevent for employee from performing their trade.  An employee can go to a competitor to work – you can’t keep them from doing their trade and having a job.

What if a current employee refuses to sign the agreement?

If a current will not sign a no-compete/covenant agreement, I would not immediately terminate them. Give them a day or two properly think it over before making a rash decision. However, if the answer is ultimately “no” then by all means terminate their employment. This will send a clear message you will do whatever it takes to protect your staff’s career.

If someone refuses to sign, that will be a good indicator of his or her intentions. They might just have something up their sleeve! We actually had an employee record a customer’s information after a call on a separate piece of paper with plans to contact these customers after he left my company. Always be on the lookout for that kind of behavior.

A no-compete clause is essential for creating a professional, stable work environment and should be a vital component in your employment standards.

New hires: Make it clear signing a no-compete is required for obtaining employment with your company.

See the job application form below we currently use regarding signing a covenant agreement.

What is the cost of creating a no-compete/covenant agreement?

To have a no-compete/covenant agreement drafted, you will probably spend $1,000 – $1,500. If someone breaks the agreement, it will cost you a lot more in lost revenue and production. If you have an employee violate their no-compete/covenant agreement – most of the time – sending out a letter from your attorney will cause them to cease any activity that violates the agreement.