Posted & filed under Business Law.

Many business owners think that non-compete agreements are only needed and entered into by big national and global companies.  Nothing could be further from the truth.  If you own a business of any size that provides a product or service to customers, you should consider requiring your current and prospective employees to sign a non-compete agreement.  The future cost savings to you may be immeasurable.

How Will A Non-Compete Agreement Help To Protect My Business?

Whether your business provides products or services, your employees likely have access to confidential or proprietary information relating to your business.  Such information may include, but certainly is not limited to: customer lists (both current and prospective), trade secrets, pricing structure, engineering and manufacturing techniques, specially designed software, market research, and other specialized knowledge.  Do you worry about what could happen to your business if any of this information getting into the hands of your competitors?

A properly drafted non-compete agreement will not only prevent your employees from working for your competitors while employed by you and for a set period time after their employment is terminated, but will also prevent them from disclosing any of your confidential information to your competitors (or using it themselves for that matter) indefinitely.

It is important to note that Georgia law relating to non-compete agreements does not cover all employees.   Non-competes with the following types of employees will be covered under Georgia law: executives (key employees, managers, officers and directors) research and development personnel, any other individual (including independent contractors) who is in possession of your company’s confidential information (including customer contacts and information) or who has selective or specialized skills, learning, or abilities. If a lower level employee does not possess any specialized skills or knowledge that you or utilizing, or does not have access to any of your company’s confidential information, their non-compete agreements would likely not be enforceable under Georgia law.

How Long and How Far?

In Georgia, a non-compete agreement will be viewed as reasonable if it extends for a period of up to two years after an employee’s termination of employment.  Any time period longer than two years, if challenged and brought to court, will be viewed as presumptively unreasonable and will either be modified to a period of time that is viewed as reasonable or it will be deemed to be unenforceable.

When an employee leaves, even if on bad terms, you cannot prevent them from earning a living.  Accordingly, the geographic scope of your non-compete agreement must be reasonable.  If your business only operates in Georgia, Tennessee and Florida, you cannot impose a nationwide non-compete on your employees.   A non-compete agreement can only encompass those geographic areas necessary to protect your business.  If your business operates on a nationwide basis either due to physical presence or e-commerce, the geographic area covered by your non-compete agreement may be broader.

What Else Can Be Included In A Non-Compete Agreement?

A well-drafted non-compete agreement can serve many functions.  Of course, you want it to prevent your employees from working for competitors or starting their own business that competes with yours and from using or sharing your company’s confidential information.  In addition to providing for these circumstances, your agreement can include non-solicitation provisions that will preclude your employees from going after your customers (both current and prospective).  This is especially important for many small businesses whose clients or customers may have developed a relationship with a certain employee over time or that have several key customers.  Further, your non-compete agreement can prohibit terminated employees from attempting to lure away other employees of your business.

Thinking About Selling Your Business?

Maybe you just started your business and have high aspirations for its success, or perhaps your business is established and you are considering retirement.  In either event, if selling your business is even in the realm of possibility, you will want to have non-compete agreements in place to assure any potential purchaser that the business they see is, in fact, the business that they will get.  If a purchaser has to worry about your key employees leaving and taking your company’s confidential information with them, immediately your company will appear less valuable.

Don’t wait until who you thought was a trusted employee leaves and then turns around to work for your biggest competitor, or goes off and starts their own business using all of the specialized skills and knowledge that they obtained working for you.  Protect your investments up front. Put non-compete agreements in place upon the outset to minimize the risks of problems down the road.