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The Importance of Non-compete and Non-solicitation Provisions in Your Employment Agreements

The Importance of Non-compete and Non-solicitation Provisions in Your Employment Agreements

If you are going to have your employees sign employment agreements, then you should assess whether to ensure that those agreements include non-compete and non-solicitation provisions. A non-compete provision prohibits the employee from entering into a business that is competitive with yours for some period of time after the termination of their employment with your business. A non-solicitation provision prohibits the employee from soliciting away employees, clients, customers, and vendors of your business for some period of time after the termination of their employment with your business.

These provisions generally go hand in hand with respect to protecting your business interests should an employee, particularly one with access to critical company information, leave. And the threat that a departing employee might enter into the same business as yours and contact your clients, vendors, and current employees to assist them with starting their own venture is real. I see it on a regular basis. Without a previously existing legal obligation not to engage in that activity, there is little to nothing that you can do to prohibit that behavior unless you are willing to bring a lawsuit and hope that a court agrees that the conduct of the exiting employee rises to the level of something like tortious interference with business relations or some similar claim. While these provisions must be very carefully drafted and the courts will not sanction unreasonable limitations, for the most part, these provisions will be found enforceable and it is much cheaper and substantially less stressful to ensure that you have covered these bases sooner rather than later.

This blog post is not intended to consist of legal advice and you should always consult with a lawyer before acting on anything you find on the Internet.  If you have questions or comments about this post, about the topic, or if you need legal assistance, you should feel free to give us a call or send us an email.