Employment relationships can be difficult and severing employment relationships can be even more difficult. When an employee makes the decision to sever their relationship with your business they may be moving on to a different field and things may go quite smoothly. But they may decide to make a lateral move in the same field. What happens if that is the case and they want to take other employees, clients or ideas that were created while working for your business? How can you protect your business and stop this from happening.
The answer is an agreement called a Non-Compete Agreement. A non-compete agreement will prohibit a former employee from competing with you for business. In other words, former employees will be prohibited from soliciting your current employees or clients, and further will not be allowed to take business creations with them. Non-compete clauses should protect the employer without hampering a departing employee’s ability to find future work.
Enforceable Non-Compete Agreements or Clauses
Are non-competes enforceable in California? Yes, provided you take caution when crafting the non-compete agreement. The non-compete agreement or clause requires the use of a few key areas to protect your interests while at the same time making a qualified effort to not overstep an employer’s boundaries. The following topics should be detailed in the non-complete clauses of an employment agreement or in a separate non-compete agreement:
- Length of Time
- Geographic Area Covered
- Protect Valid Business Concerns
The non-complete should set forth a duration of time to be covered. Typically issues arise shortly after an employee’s departure. As such, most employers find that a one year time frame sufficient to protect their business concerns. Further, a few courts have found that non-compete agreements exceeding two years invalid, as they hamper an employee from finding future employment.
The non-compete should also set forth what valid business concerns you are protecting. What is a valid business concern? A valid business concern can include: trade secrets; confidential or proprietary information regarding the business, clients or customers; and specific ways which a service is provided.
Trade secrets are a business practice or process or collection of information not commonly known to others. While your non-compete should include the protection of your company’s trade secrets, it is important to note that trade secrets are protected in California, as well as all states, without a written non-compete. Trade secrets are protected under California law and the Uniform Trade Secrets Act (UTSA). For further information on trade secrets protections please visit the United States Patent and Trademark Office website at https://www.uspto.gov/trademark.
To sum up an enforceable non-compete should provide protection for both the employer and the employee. An employer has the right to protect its business, however, they are not allowed to create an undue hardship on an employee should they wish to seek employment elsewhere. Take time to verify that your non-compete is fair to all parties and you should not have any issues regarding its enforceability.