Why non-compete agreements are important to your small business

 Posted on December 21, 2016 in Uncategorized

If you run a small business in Texas, you may have the goal of building a staff that is like an extended family. You hope to hire employees who are enthusiastic and reliable, and you want them to feel that you trust them. This may be one of several reasons why you may be reluctant to ask your new employees to sign a non-compete agreement.

However, a non-compete contract - or any covenant that restricts competition - may be valuable to a small business in many situations. Much like a prenuptial agreement does with marriage, the non-compete contract can minimize complications and costs if an employee leaves your company.

A non-compete is good for your company

Competitive restriction contracts state that your employee cannot work for a competitor company or start his or her own similar company for a reasonable period of time within a reasonable geographical area after leaving your employ. Such a contract may also stipulate that an employee who leaves your business cannot recruit your customers or disclose any confidential information about clients or products.

By taking steps to guard valuable information about your business and its products, you demonstrate to the courts that the information is entitled to protection as a trade secret. Customer information can also be considered a trade secret, and a non-solicitation clause will go far in protecting your client base.

A non-compete is good for your employees

From the day you hire them, employees learn what you expect from them in the ways they perform their duties, promote your product and conduct themselves with clients. A non-compete is another way to clarify your expectations of them. By signing the contract, your employees can agree to many things:

• That any client relationships the employees establish belong to you and your company
• That any information base the employees build stays with the company if they leave
• That you may be entitled to damages if the employees break the contract
• That your employee may be responsible for the cost of litigation if he or she challenges the non-compete in court

Knowing these things from the beginning of their tenure may prevent such disputes from arising and reduce the chances that your employees will risk litigation.

A non-compete is good for your clients

A small business can only survive if it has a strong base of loyal customers. Instilling confidence in your customers is a good way to keep them loyal. If clients worry that your employees can walk away from the job with confidential information about them, they may not feel as comfortable doing business with you.

Having your employees sign a contract of competitive restrictions will allow you to reassure your clients that their information is protected, and that - even if an employee leaves - your company will be able to continue providing them quality services.

An ounce of prevention

Including a non-compete contract in your new hire orientation may feel like a cost you cannot afford. However, your attorney can explain the many ways such a contract may save you money in the long run by protecting your company's client base and valuable trade secrets.

Additionally, an attorney with experience resolving non-compete disputes will be able to advise you on how to formulate a contract that is reasonable in its scope and duration, and what to do if an employee violates the contract and attempts to recruit your clients or infringe on the rights of your business.