A non-compete has become a crucial component of the technology industry in light of the expanding economy and the daily introduction of new technologies. Non-compete agreements are crucial to maintaining a competitive edge and aid in discouraging employee espionage in those states that permit restrictive covenants. A non-compete is your strongest line of protection against your rival when an employee quits a firm, especially in sales environments or industries where the information is extremely important.
I was reminded of the importance of employer non-competes for companies to use as an intellectual property and company protection tool after reading Dan Schawbel’s article on his opinion that non-competes are on the decline and should be illegal. I can speak from personal experience as an organizational management when I say that losing our top performer is our greatest worry. But even worse than losing your top salesperson is having your customers targeted and seduced away by a former employee who is well-versed in your company’s playbook. Because of this, non-compete agreements are crucial to safeguarding your business’s profitability rather than just your employee’s livelihood.
One of the most well known cases involving intellectual property was Mattel vs. Bratz where developer, Carter Bryant, was order to pay damages to Mattel for trying to create the Bratz brand while still working for their company. After winning, Mattel required the creator to pay hundreds of millions of dollars in damages. Although non-compete agreements may appear harsh to a job applicant, they are a vital kind of insurance for any business in a cutthroat market. Companies are now utilizing the use of a non-compete clause in any typical employment contract for a number of important reasons, including trade secrets, top talent, and protection from competitors. Employees who develop ideas while working for a company do not own the rights to those ideas, unless they are Mark Zuckerberg and then they settle in court.
There are a ton of lawsuits surrounding social media and who owns Twitter followers and LinkedIn connections. All of these have some connection to who owns what when an employee departs. If you’re an employer looking for a guaranteed media frenzy, file a lawsuit to claim ownership of your departing employees’ Twitter followers. Even though it won’t be favorable, publicity is publicity, right?
The employer is protected but not guaranteed by having a strong legal foundation in place when it comes to their employee. Additionally, it conveys to potential clients, applicants, and competitors that you mean business.
Protection of Trade Secrets.
Any type of valuable business information that you are trying to keep a secret from competitors is subject to trade secret protection. Maybe you are wondering if there is a difference between non competes and protecting your trade secrets. Putting safeguards in place not only protects this information, but it shows interested parties that you’ve attempted to keep your idea an actual secret. A widely recognized precaution includes requiring employees to agree not to use or disclose confidential information. Having non-compete clauses in your employment contract is taking an extra step in keeping your company trade secrets, a secret. Plus, there’s this little thing called an invention assignment clause when it comes to work for hires. Tricky, complicated stuff. That’s why I call my favorite lawyer for the skinny. He steers me in the best direction to chat with specific attorneys who specialize in the complicated world of this kind of thing.
Enhance the Value of Your Company.
Increase Your Company’s Value. Like the majority of Silicon Valley businesses, you desire to sell or be acquired at some time during the course of your business’ existence. Through non-compete agreements, owners and significant investor-employees (think stock options) may be barred from competing with the new owner. According to California Business and Professions Code Section 16600, restrictions on an employee’s right to compete are not permitted unless they are connected to the sale of a business or the employee is returning a sizable portion of their stock to the company as they leave. It is more crucial than ever to safeguard the value of your business by making these personnel sign binding non-complete agreements. When a business is sold, the buyer wants to know they are getting what they paid for because they bought the firm in the first place. The worth of your company drops sharply if customers think that essential assets have been shared with rivals. When starting a business, get the owners, partners, or significant investors to sign non-compete agreements because forgotten covenants can lead to their own legal disputes.
Deter Competitors from Hiring Employees.
Although a non-compete clause won’t completely prevent your rivals from hiring your employees, having access to sensitive data or customer relationships will. The good thing about the shifting competitor culture is that it sends a signal to your rivals that you are ready to defend these interests.
Protecting Your Work Assets Like Marissa Mayer
A non-compete clause or other assignment of inventions clause doesn’t have to seem like an evil thing that companies do to end all outside engagement. Then again, we know exactly how the press and Yahoo employees feel about the recent HR decree from CEO Marissa Mayer ending telework. A non-compete is not an employee retention tool. An employee non compete agreement is a company protection document and mechanism pure and simple just like signing your employee handbook acknowledgement. Non-competes do not guarantee that if used in good faith an employee will stay loyal to a company and not destroy the company from the inside out. A policy, document or corporate decree doesn’t change the company culture, bad work environment or shoddy way of doing things. There are many benefits to the company and even to the job seeker when it comes to non competes. There are also perils too so check your state requirements when it comes to non competes. Don’t look at a non-compete as a contract to hold back your employees, but to give them the freedom to develop and excel at the products offered by your own company. Protecting your assets is just good business sense especially when your employees know what those boundaries are. Now, back to working in my virtual home office.
What’s your experience with Non Competes? Have you had a non compete go bad or a work story you care to share? As a business leader, have you ever had a situation when you had to involve legal or go to court?
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