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Five Reasons Your Business Needs a Non-Compete Agreement

Restrictive covenants are commonly called non-compete, non-solicitation, and non-disclosure agreements.  These Florida employment contracts prohibit employees from engaging in competitive activities after their departure from your company. While state law precludes most agreements in restraint of trade, it does allow non-competition, non-solicitation and non-disclosure agreements that extend beyond a person’s employment term – so long as the conditions are reasonable. Business owners may be reluctant to hire a lawyer to assist with preparing these types of agreements due to the cost, but there are a number of reasons that legal assistance is worth the investment. Here are five of them.

  1. Protect Valuable Customer Relationships: Employees in certain positions may cultivate close relationships with your customers, and you don’t want that employee taking a client to a competitor when he or she leaves your company. Your customers add value to your company, so their departure is like losing an asset. A non-solicitation agreement can prevent this situation by prohibiting an employee from contacting and soliciting a customer for a specific reasonable time period after parting ways.
  2. Deter Competitors from Luring Employees: You can draft a non-compete agreement to prohibit an employee from working for a competitor company for a reasonable time period after his or her separation from your company, and also make the competitor a potential party to a lawsuit if it hires that employee to compete with your business. However, the contract must have some purpose other than restricting trade – such as protecting your customer relationships. Your competitor must also have knowledge of the non-compete contract.
  3. Establish Expectations with Employees: These restrictive covenants demonstrate to your employees that you intend to protect the information you entrust them with during their relationship with you. The time to establish these expectations is at the time of hiring, or before the employee leaves the company. You spend considerable resources hiring, training, and developing employees, so you have an interest in that investment.
  4. Boost Client Confidence in Your Business: Your clients will appreciate knowing that their financial information is protected through a non-disclosure agreement. These contracts typically include provisions stating that a departing employee cannot take customer details that belong to your company. Customers are more confident that their important business data is in good hands with a non-disclosure contract in place.
  5. Enhance the Value of Your Business: In the event that you want to sell your company in the future, these types of restrictive covenants with employees actually add value to your business. A potential buyer may fear that key employees with access to important customer data will leave the company when you sell. Non-compete, non-solicitation and non-disclosure agreements prevent this type of situation, ensuring the buyer retains the value of your company’s customer data after you sell.

As a business owner, you’re always keeping an eye on your company’s bottom line. While retaining an attorney to assist with drafting a non-compete agreement does require an investment, you’ll likely save money in the long run by protecting your business interests. The employment law attorneys at Penichet Law have years of experience in preparing different types of employment contracts, so they have an in-depth understanding of the complexities of Florida law. Please contact our Miami office for more information or with questions.