When negotiating an employment contract, your company might focus on limiting how high the salary goes or how many vacation days it will grant a specific employee. There are other considerations that are also very important for your company beyond just the budgetary implications of the new hire.
Specifically, your business will need to consider the risk that workers with access to intellectual property like house recipes or unique fabrication practices will diminish your company’s competitive advantage by sharing those trade secrets with others.
Including one or more of the three restrictive covenants below in your employment contract can limit the risk of your workers misusing the information obtained at your business or the relationships developed while working there.
Non-compete agreements
The non-compete agreement is probably the best-known restrictive covenant. It prevents your employee from going to work for a direct competitor or from starting a competing business.
However, non-compete agreements are often subject to intense court scrutiny if you try to enforce them. They are typically only enforceable if you limit the area in which they apply and how long you can enforce them.
Non-disclosure agreements
Unlike non-compete agreements, which might limit the ability of an individual worker to continue supporting themselves, non-disclosure agreements specifically protect trade secrets and other private information that an employee learned while working at your company.
A non-disclosure agreement can protect your company from someone sharing any private information, potentially for much longer than a non-compete agreement would remain enforceable.
Non-solicitation agreements
Someone doesn’t have to have access to trade secrets or work for a direct competitor to harm your company. They can take a job in a different industry and then start reaching out to your staff members to get them to come to work for the same company.
Non-solicitation agreements will protect you from former workers trying to hire your existing staff. Non-solicitation agreements can also protect you from a former worker directly approaching your customers or clients to solicit them for a contract.
The companies that add these terms to their employment agreement will have an easier time fighting back if workers misbehave after leaving the company. Integrating restrictive covenants into your employment contracts is one powerful way to protect your business when hiring new staff members.
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