You always want to protect your business from risks. But how can you protect it when there are people out to compete against you? Competing ideas. Competitive pricing. And what about the employees who decide to leave you and work for the competition?!? It’s easy to feel like you’re not in control.
Many businesses have used non-competition agreements to ward off the threat of employees taking your trade secrets to the competition. In the last 15 years states have become increasingly involved with legislation around what and how a non-compete agreement can be used. Pennsylvania is the most recent to make a statement on the restrictions an employer can place on an employee, the language that must be used in the agreement and what consideration can and should be used in acquiring an employee’s agreement. Pennsylvania has had “consideration” requirements for many years. The recent ruling by the PA Supreme Court is a clarification for employers who … ahem … may have interpreted the law in a different light than intended. My colleagues at McNees Wallace and Nurick provided a wonderfully articulate summary on the recent ruling here: PA Labor & Employment Blog
Do you use what’s commonly called a non-compete in your business?
Whether you’re an employer or an employee, you should be informed of your state’s regulations. And you should think about the practices you have in place today. [tweetthis]Are your non-compete agreements more of a risk to your business than you realized?[/tweetthis]
- Are you requesting copies of existing non-compete agreements from candidates prior to making an offer of employment?
- How are you using non-compete agreements in the hiring process?
- Are you giving ample opportunity for candidates to review the terms of the non-compete agreement prior to accepting a job offer?
- What is your process to extend consideration to existing employees if they move into a role requiring a non-compete agreement?
- How are you tracking what consideration was extended to each employee who signed a non-compete?
- What is your process to exercise your rights under a non-compete after an employee leaves your company?
Just a few questions to consider as you think about your existing processes. I’ve helped a number of former employers of mine and current clients adjust their processes to ensure better compliance. (Did I mention evaluating non-competes should be on your due diligence and M&A checklists?) It’s important to partner with capable legal counsel who can support your needs in drafting or revising your non-compete, confidentiality or other employment documents.
Protect your business from risks. But make sure you follow the laws of your state so you don’t get caught in thinking you did the right thing when “close enough” isn’t really good enough.