No complete agreement: a new form of business insurance
It’s really very ironic that one of the greatest assets of a business can also be one of its greatest threats. Key employees having expertise and knowledge can certainly help any business to flourish. But when they leave the employ and take the same strategic plans, financial information, trade secrets or customer lists to the competitor, they can significantly jeopardize anybody’s success. That’s why a number of companies consider no compete agreements a form of business insurance. They provide some protection against the loss of highly confidential, strategic, operational, and financial and other proprietary information, and they offer some legal recourse should a key employee leave to work for a competitor as well.
While deciding whether to use no compete agreements, it is better to think about goals. One must have a legitimate business reason for asking employees to sign these agreements. It’s helpful to ask how much such key employees could damage the business if they went to a competitor. Would they have strategic, operational, financial or other proprietary information to share? Could they take customers, clients or trade secrets with them?
It is always good to be selective yet consistent when determining which employees should sign no complete agreements, and remember they must be used uniformly among employee groups. They should contain nondisclosure language, wherein employees agree not to share information learned from their employment with other employers. That’s especially serious when trade secrets, trade practices and patents are essential to anybody’s business’s success.
No complete agreements should incorporate restrictions on subsequent employment, including both narrow geographic and time limitations. A good rule of thumb is that no compete agreements should be limited to a maximum of two years and a 25-mile radius from the employee’s primary place of employment. So it is up to own decision as far as no complete agreement is concerned as business insurance.