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Do You Need a Non-Compete Contract?

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Whether your employees work directly with customers or in the service bay, they may come into contact with sensitive, competitive information that they could potentially use to establish a competing business nearby.

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Non-compete agreements may help your business safeguard trade secrets and other information, but only if they hold up in court.

Some things to consider when designing
non-compete agreements include:

• Length and scope: Employers must demonstrate that employees had access to confidential information that would be damaging if communicated to a competitor. If so, the agreement generally will be considered enforceable only if it’s “reasonable” in duration and geographic scope. Agreements that restrict former employees from working for a competitor for up to one year are usually considered reasonable.

• Fairness: Employers should also make sure the circumstances of the non-compete agreement are fair. Provide employees with a copy of the agreement to review before they start working, and give them a chance to consult legal counsel and ask questions. Although not a legal prerequisite for enforcement, these steps make an employer seem more sympathetic and reasonable and increase probability of success in litigation.

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• Timing: Establish a non-compete agreement before an employee begins working. In some states, waiting just a few weeks could hinder the enforceability of the agreement. For a non-compete agreement to be executed after an employee starts, the employer must offer additional consideration – such as a raise or benefit increase – in exchange for the restrictions.

Protect Your Good Name

A trademark usually consists of a word, phrase, logo or other unique symbol that distinguishes a product or company from others. To protect your good name – and unique marketing advantage in your market, experts recommend that small businesses trademark their names or other identities by applying at the U.S. Patent and Trademark Office (USPTO). Expect to encounter two fees: one for filing and another for legal representation. If you’re too busy to apply in person, you can register and pay online at www.uspto.gov.

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