Are Your Non-Competition Agreements Actually Protecting Your Company?

I can’t count the number of clients who have called us over the years to request that we either draft or rework the non-competition agreements they present for signature to their employees.

What I can count (on one hand, no less) is the number of occasions on which business owners actually view these agreements in their correct light.

Here are the facts – stripped to the bone as they may be:

  1. Non-Competition Agreements and Non-Solicitation Agreements are enforceable in the state of Maryland.
  2. Judges scrutinize every letter of these agreements (called “restrictive covenants”) because public policy in MD favors the right to find employment without restriction.
  3. In order to be enforceable, restrictive covenants must be specific as to duration and, in the case of Non-Competition Agreements, geography.
  4. The dividing line, upon which judges base their decisions is not what appears in the contract, but rather what constitutes the (former) employer’s legitimate protectable interest.

Many companies seek to have their employees sign restrictive covenants that are as broad as they can possibly be.

Why ask for two years when you can insert the word “four?” 

Why say “Baltimore County” when “the mid-Atlantic” would do so nicely? 

The answer lies in the concept of “protectable interest.”

Companies are best advised to do now what judges will almost certainly do later: Evaluate the definition of “customer,” the geographic restrictions and the duration of the covenant that is actually necessary to protect the relationships and business that matters.

Anything more than that risks not only alienation of your best employees, but the possibility a judge will decide that those agreements are not, in fact, worth the paper they’re printed on.

Key Takeaway: Evaluate whether or not your current Non-Competition or Non-Solicitation agreements accurately define your company’s protectable interest.

This entry was posted on Wednesday, July 16th, 2014 at 5:47 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.