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Why Companies Should Have Employees Sign Non-Compete Agreements

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Why Companies Should Have Employees Sign Non-Compete Agreements

Non-compete agreements are an important matter that every company should take seriously. In fact, Nike recently settled a lawsuit against formers designers who ‘defected’ to Adidas to help them open up a design center in New York. Non-compete agreements are critical to protecting the company and its future profits.

What are the Legal Requirements for a Non-Compete Agreement?
Every non-compete agreement must satisfy three basic requirements. First, it must protect a genuine business interest. For example, this could be trade secrets or an established clientele base. Second, it must offer the employee something of value in exchange for signing the agreement. For example, this could include a raise, promotion or even the job itself. Third, non-compete agreements must be reasonable. This means the duration and geographic area must be limited.

What are the Financial Benefits of Non-Compete Agreements?
The most highly recognized benefit of a non-compete agreement is trade secret protection. Since information is power, any employees that discloses confidential information threatens the financial health of the company. Non-compete agreements also protect the investment that has been made in recruiting, training and retaining top employees. Finally, having a non-compete agreement will reduce potential lawsuit costs if an employee does break the contract.

What are the Customer Benefits of Non-Compete Agreements?
Non-compete agreements will also protect your customer relationships. This is because sometimes when an employee leaves, their clients may faithfully follow. Therefore, non-compete agreements will increase the client confidence and retention. Non-compete agreements also help to clarify the professional expectations for employees, which will improve their behavior with clients.

What Happens if the Employee Breaks the Non-Compete Agreement?
A court ordered injunction is the most common result of an employee breaking a non-compete agreement. This means that instead of seeking monetary damages, the employer simply asks the court to enforce the non-compete agreement by making the employee leave their new employer. However, seeking compensatory damages due to loss of profits is also an alternative.

Is Non-Compete Agreement Violation a Serious Problem?
One recent report by Fair Competition Law reveals the increasing number of non-compete agreement violations. There were about 1000 non-compete and trade secret decisions issued by U.S. courts in the year 2000. Every year the number has increased until 2013, when there were almost 3000. Non-compete agreement violations are a growing problem.

In conclusion, non-compete agreements provide legal, financial and customer base protection to businesses.  For assistance with your non-compete forms, contact Goldman & Ehrlich.


Protecting yourself from retaliation claims

Retaliation is the act of firing, demoting, harassing, or otherwise “getting even” with a person, who complained, testified in an investigation, or appeared in court. The Equal Employment Opportunities Commissions forbids retaliation when hiring, firing, paying, assigning work, laying off, promoting, training, or giving employee benefits.

Piercing the Corporate Veil

Piercing the corporate veil is not only a theory. It is a practice. Harvard Law school lists the three justifications for piercing the corporate veil:

• To bring the corporation into compliance with statutes
• To remedy what appears to be fraudulent or misconduct
• To satisfy bankruptcy court trustees

Unlawful Termination

If you must terminate or lay off an employee, just cause is:

• Numerous absences or repeated tardiness
• Criminal behavior
• Frequently disrupting the work environment
• Poor performance
• Insubordination

Indemnity Insurance

Professional indemnity insurance is freedom from professional liability, a global and national product, which protects professionals from incurring losses due to a breach of their duties. Indemnity clauses concern contractual indemnity, as opposed to common law indemnity.

Indemnity Clause

The indemnity clause in a business contract obligates a party to pay for expenses incurred in a business transaction. Employment lawyers Goldman and Ehrlich specialize in a dual perspectives: advising and representing businesses, local, state, and the federal government; and employees. Employees, who hastily signed:

• an unreasonable employment contract
• an overly broad non-compete agreement
• a contract to work where their legal rights are violated

Retaliation Claims

Your business’ best defense against retaliation claims is an understanding of the risk involved during a business transaction. Typical risks in employment contracts are:

• Personal injury
• Property damage
• Monetary loss
• Intellectual property rights violated
• Attorneys’ fees and costs

Employment Contract

Your employment contract should state the limits of the employer’s professional indemnity insurance. Indemnity insurance does not cover:

• Property damage or injury
• Damage under warranty
• Employer’s liability
• Insolvency
• Pollution
• Acts of war or terrorism

Employee’s Claim

Employee retaliation claims are not just formalities. If your employee has filed a retaliation claim, you will be asked to justify the unlawful termination, or any and all instances when the employee alleges retaliation. If you conduct business in more than one state or country, the proceeding or investigation will occur in the jurisdiction where the alleged retaliation occurred.

If you need an employment law attorney to advise or defend your business against an employee’s claim of retaliation contact us, Goldman and Ehrlich advises businesses when termination is proper. Goldman and Ehrlich defends clients within government agencies, in agency hearings, and in local, state, and federal court.

I’m being fired for having a side business similar to my job, but I never signed a non-compete

It is quite natural for you to want to expand your employment options after certain amount of experience in an industry. If you have worked for a company for a number of years, you have likely attained a great deal of knowledge that will allow you to open your own practice in the same industry. However, many unscrupulous competitors may try to limit your ability to use your own expertise in your own industry by suing you into submission or by firing you.

In most cases, these businesses are attempting to use their leverage to try to scare you out of competing with them. This may include your old company. However, there is very little in the law that states that one company has the ability to completely remove a potential competitor from an industry.

No law is good unless you have the ability to argue it in court. If you are trying to start a new business, then you likely do not have the time to look up laws to defend yourself and keep your company running at the same time. This is a perfect time to outsource the research and the administration of your court case to a reputable small business attorney. You know that you have a leg to stand on because of the spirit of your business – you did not steal ideas from anyone. All that you need is the appropriate law to back you up and the right person to present your case in court.

A good attorney may also intimidate your opponent into backing down in and of itself. As stated before, many of these companies do not really have a legal leg to stand on when they are suing you in the first place, especially if they fired you. If you have a reputable attorney that is known to your competitors as a fierce court warrior, they will likely conclude that the money and time spent fighting you is not worth it.

Even if the case moves forward, you will have an advocate on your side who knows how to argue your case to the court. You will not have to take time out of your day to deal with the pesky administration of court documents. You will be able to run your business in the way you see fit, and you will be able to defend yourself against your competition in your new industry.