Do you know your NCAs?

The United States of America is a nation of laws, principles and fundamental rights. As a small-business owner and employer, you are entitled to many privileges. As it pertains to your employees, these include the right to expect their very best efforts, their diligence and persistence in producing a quality product or service while they're on the clock.

You also have a right to privacy. More specifically, you have a right to the protection and preservation of your intellectual property. One of the best ways to keep eyes-only information under lock and key is with a non-compete clause.

What are NCAs?
As their title more or less suggests, non-compete clauses — otherwise known as NCAs (non-compete agreements) or "covenants," — are provisos in which employees promise not to sign on with another company upon leaving yours. Generally speaking, this agreement is for a specific time period and in industries that are under the same umbrella as yours, whether it be manufacturing, health care, retail, finance or another vertical.

NCAs accomplish a few things. For starters, they prevent rival companies from exploiting data that is proprietary to your company. They also prohibit former employees from profiting off of your ideas. For example, if the data, ideas, recipes or formulas that you want kept secret are key to your success as a company, an NCA makes it illegal for that an employee to start his or her own company in order to sell what is rightfully yours.

Must follow certain rules to be legally binding
All this being said, you can't just attach an NCA to employee contracts and call it a day. You have to have legitimate business interest reasons as to why your staff must agree to the terms and conditions of the NCA in order to be hired.  

Here are a few other matters you'll need to specify for NCAs to be enforceable:

• The duration of the NCA
• The full names and street addresses of all the parties involved
• The geographic scope or locations of employers where workers cannot apply

NCAs are enforceable by the courts. In other words, should someone you hire sign a non-competition agreement but then go on to reveal trade secrets, you may be able to sue that person, or at the very least file an injunction.

At the same time, though, there are very specific rules that NCAs must adhere to for them to be considered legal and enforceable. For example, the geographic scope in which former employees cannot work must be "reasonable." The same goes for the duration of the NCA; It has to be within reason.

At the Law Offices of Donald W. Hudspeth, contract law is one of our specialties and we can provide you with the guidance, expertise and legal assistance so all your contracts are fully compliant and customized. Contact us today for a free consultation.

Categorised in: Contracts & Transactions, Intellectual Property Law

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