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Use care in non-compete pacts

One of the most controversial areas of employer/employee relationships is non-compete agreements. Usually drafted by an employer, the contract prohibits the employee from joining a competing organization if terminated.

For many years, I required new employees to agree that after I had trained them in my industry that they would not leave me to start their own competing business or go to work for a competitor until a stated amount of time had passed.Fortunately, I have never had to enforce an agreement. I have found that if the requirements are reasonable and people are treated fairly, they will often wait out the reasonable time required rather than face a possible court battle.

I believe people are basically honest and will keep their word if they agree to something.

Here are a few ideas to remember when writing non-compete agreements to help them hold up in court.

Include a reasonable time frame.

It is foolish to think a judge or jury will enforce a non-compete agreement for the life of a former employee. One to two years seems to be acceptable in most states.

Outline a specific geographic area.

A well-written non-compete agreement will also include a distance that the signer will be prohibited from competing in. My Salt Lake employees were asked to sign an agreement that included a prohibition from competing within a 60-mile radius of the city limits. I felt that was reasonable, since our service area included Ogden and Provo.

Protect specific business interests.

Since both my recruiting firm and medical oxygen business had unique aspects we originated, our agreements spelled out what these proprietary techniques and tools were that the employees would be trained to use. Judges often look more kindly on enforcing agreements that protect unique business techniques or methods that could be taken to a competing company.

Contact with customers prohibited.

Agreements can specifically prohibit any contact with customers for some period of time after terminating employment.

Since customers are often a company's greatest asset, contact with them from a competitor by a former employee needs to be prevented. Customer lists, vendor contacts and copyrighted material should also be specifically mentioned and protected from being taken out of the office without permission. Again, this makes a better case for the enforceability of the non-compete.

Timing of signing the agreement.

When you ask for a non-compete agreement to be signed is also critical. Courts have not looked favorably on agreements that are signed months or years after the employee started working for the company.