I read an excellent article by Adam Siegelhiem of Stark & Stark concerning Restrictive Covenant Agreements for Franchises. Although his post is intended for franchises it is advisable for any business to consider restrictive covenant agreements for their employees.
Somewhat surprisingly, many of the small business owners I talk with are reluctant to enter into restrictive covenant agreements with their employees. These business owners are afraid that the employee won’t sign or that other confrontations may occur. Some just don’t believe they should keep their employees from finding another job – even if it is to the employer’s detriment.
But in order to avoid disruptions to your business and client relationships you should consider various agreements to protect yourself including, but not limited to:
- Confidentiality agreements;
- Non-compete agreements;
- Non-solicitations of clients;
- Non-solicitation of company employees.
If you are one of those who is not comfortable with a non-compete agreement for your employees I would strongly encourage you to have at least the confidentiality and non-solicitation agreements. These agreements generally provide protection for your business without restricting the employee’s ability to work elsewhere. If a departing employee attempts to take clients or other employees with them you will be glad you had those agreements in place.
* Remember these types of agreements are very state specific so it is important to seek the advice of a business lawyer in your state before implementing the agreements discussed in this post.