How To Stop Your Ex-Partners Or Ex-Employees From Becoming Your Competitors?

​Ever dreaded the thought of seeing your ex-employees or ex-partners as competitors? If yes, you aren't the only one who worries about the same. 

This is where the idea of a “non-competition agreement” (or a “non-compete” for short) comes into the picture. 

Employers, who wish to protect what they worked hard to build, make it a point to have a non-compete for its employees or the business owners that are part of a partnership.

Wondering what “non-compete” is and how to effectively draft a non-compete agreement ? 

This article will help you understand these items.

What Is A Non-Compete?

To define, a “non-compete” or a non-compete agreement is a contract that binds the employees in the sense that they will not work with one of the rival companies. 

Also, the agreement restricts them from setting up a new business in the same domain, or to put it this way, employees cannot set up a similar company. 

What's important to note here is that the period for which the above stands true must be specified in the agreement.

One of the goals behind the creation of such an agreement is to prevent the employees (or partners) from sharing sensitive information with rival companies. 

In a way, the employers succeed in preserving the company's information, limiting the possibility of former employees exploiting sensitive information.

This could be anything from marketing plans, contingency ideas, trade secrets, and/or customer/client lists. 

In other words, you prevent an employer or partner, for a certain time period in a particular area, from competing against you while using your own information and property against you.

Creating An Non-Compete : Information To Be Added

Creating a Non-Compete requires a whole lot of information to be added to the contract.

Every contract must specify the name as well as the address of the involved parties. By involved, we mean to say the Protected Party (the one that is requesting the agreement) along with the Noncompeting Party (the one that agrees to the non-compete clause or contract)
The starting date and the duration for the agreement .
The reason behind the creation of the agreement
The geographic area within the agreement. It may so happen that the employee is prohibited from entering into a similar trade in New York, for instance . In this case, they can always set up their business out of the geographical region.
The compensation for signing the agreement, if any.
The individuals that are required to sign the agreement.

Drafting The Non-Compete

With that being said, we now see what is the best way to draft a non-compete clause or contract and prevent ex-partners and ex-employees from becoming your competitors.

A Non-Compete For Core Employees: Legally the conventional contract signed by every employee might not hold importance in the court as restricting everyone to work outside the organization isn't relevant. It is best to have a non-compete agreement for employees at the critical or sensitive positions.
Adhere To State Laws: Not every state abides by such an agreement in the same fashion. Even if you impose one, if it's against the state laws, it may not hold up in court.
Keep It Subtle: You need not put too many restrictions on the employees or partner. Instead, keep it short and pose as many restrictions as required.
Reminders: As and when the employee or partner leaves the organization or the partner quits the engagement, make sure you remind them of the non-compete, expecting that they would stand by it and not do things that aren't acceptable.

Keeping all the above in mind, you can now start creating the non-compete agreement for your employees and partners.

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Yoel Molina, Esq. (AKA “Mo”)