As commonplace as non-compete agreements have become, they’re still viewed with suspicion by employees. While workers fear that non-competes will be used to prevent them from earning a living, entrepreneurs are intent on preserving their trade secrets. The concerns on both sides are real and come into a particularly sharp focus when asking an employee who is also a friend or family member to sign on the dotted line. Though this scenario can create stress in the moment, you will avoid much greater conflict in the future if you stick to your employee standards now.
As much as you may wish to avoid discomfort by asking a friend or family member to sign a non-compete, consider what could happen your business if you skip this step and then your relationship suffers some kind of rift. The person who you once trusted could leave your company and decide to start a competing business, relying on the industry knowledge and training you’ve provided, possibly in a vindictive way. As unimaginable as this may sound, it happens more often than you can imagine. With no non-compete agreement in place, you’d be left with few legal options.
A well-crafted, fair non-compete agreement is structured in a way that preserves and protects your business without being punitive or restrictive of your employee’s ability to support themselves or their family. When the terms of your non-compete are reasonable, you only need to pursue legal action when an ex-employee’s actions threaten your business’ success. To ensure that the non-compete is protective, fair, and enforceable, it should include the following:
• The duration of restrictions should not be excessive and should be appropriate to the employee’s position, with higher-level employees restricted for longer periods of time than lower-level employees and geographic restrictions not expanding beyond the area where you do business.
• Model your agreement around those of businesses in your industry to illustrate that you are simply trying to maintain competitiveness.
• Address special considerations such as having been given access to trade secrets, sales strategies, or the formation of the company, or if clients have come to think of the employee as the face of your company.
If a trusted friend or family member balks at signing a non-compete agreement, it may be an indication that having them join your company is a mistake. For guidance on how to craft an agreement that is fair to all involved, contact us today to set up a time to meet.