Your business is valuable, and you want to protect it in the face of inevitable employee turnover. One way to do that is through employment agreements – but companies frequently ask: Which provisions should our employment agreements include? Answering this question depends on your company, its business model, and its goals: What is the business attempting to protect? How broad do the protections need to be? What is the legitimate business interest?
Three key terms often found in employment agreements are non-compete provisions, non-solicitation provisions, and non-disclosure provisions. Each seeks to protect your business in different ways and from different types of harm. We will explore each of these three provisions in more detail in future posts.
Which provisions to include in your employment agreement is a fact-intensive inquiry. Does your business have trade secrets or other information that would harm your company if leaked? Do you invest substantial time and resources into training your employees on a proprietary method or in a new way? Do your employees have access to your company's trade secrets? Are some of your employees seen by the public as the "face" of your company? Are you primarily concerned with making sure your customers or other employees aren't "poached" by former employees?
Depending on how you answer these questions, as well as your business model and needs, it may be appropriate to include one or more of these three provisions in your employment agreements. Employers beware, however, that various jurisdictions enforce these provisions differently. For instance, in some jurisdictions, non-competes are not enforceable at all. In other jurisdictions, non-competes are enforceable only if reasonable based on certain factors. (As an aside, employment agreements should also contain a choice of law provision so that all parties are clear which law applies and informs the extent of enforceability.)
Companies should attempt to use employment agreements that are tailored for their company's needs (and possibly, for certain employees or classifications of employees). Agreements containing these provisions are particularly susceptible to legal challenge if not properly drafted, and can be very costly to enforce or defend. Seeking trusted legal advice from the outset may save your company a considerable amount in the long run.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.