Employee Poaching: 5 Essentials for Non-Compete Agreements

Here are 5 ways to protect your company and prevent employees from entering into competition with your business.

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Well-crafted employment documents can protect your company from losing employees to the competition.

You have built a success small business. You have also created valuable intellectual property, and you have a great stable of solid clients. Every entrepreneur needs employees to move the business forward, but the last thing you want to do is spend valuable time and money training your competitor–which is what a former employee has the potential to become after leaving your company.

Employee poaching happens every day — when a company hires an employee from a competing business.

How can you protect your business?

Through the careful use of non-compete agreements.

Why should you be careful? Because non-compete agreements need to be worded carefully as their basic purpose is to prevent a departing employee from working. Or, at least, from working in any capacity that is the same or similar to what she was doing for you.

Courts (and the state laws) try to balance two perspectives. They want to reconcile the company’s need for protection with an employee’s need to obtain alternative gainful employment. Become too extreme in your wording (e.g. telling a file clerk he can’t work for a competing company anywhere in your state for five years after leaving your company) and a court will strike down your non-compete.

However, yes, you can come straight out and say “you can’t work for a competitor.” That’s the traditional form of non-compete. There are also a handful of other ways to protect your company and prevent employees from entering into competition with your business.

1. Non-solicitation agreements.

These kinds of provisions prevent employees from reaching out to your client and customer base (a fertile source of leads for the competition). They can also be worded to prevent former employees from poaching your current staff, luring them away to work for a competitor.

2. Confidentiality and non-disclosure agreements.

These ensure that any trade secrets your employee learns on the job stay with the company. They define the kinds of records and information deemed confidential and prevent the employee from disclosing them to a competitor or otherwise. The information really has to be proprietary, though. Don’t include public information–like a client list on your website–in your definition of confidential. It won’t fly.

3. Work-for-hire agreements.

Generally, intellectual property belongs to the person who created it. But not if you have a written work-for-hire provision.

These terms ensure that ownership of any documents, software, inventions, concepts–anything–that an employee created on the job remains with your company. In other words, the employee was hired to create the work for you, not for her own purposes.

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