Competition is fierce in the business place. To protect a company’s interests, many businesses enter into an agreement with their employees that include a non-compete clause. A non-compete clause is simply an agreement between an employer and an employee where the employee agrees to not enter into or start a similar business or trade that competes with the former employer.
What do Non-Compete Clauses cover?
Non-compete clauses can cover such interests as trade secrets, business methods and client rosters.
Say you are a restaurant known for your special spice recipe. Because this spice recipe is crucial to the business’ success, it is considered to be a trade secret and you do not share that recipe with just anyone without protecting the company. Therefore, a non-compete agreement is entered into so that the company’s employees are held accountable if they go elsewhere and share the company’s trade secrets with a competitor. (Trade secrets are defined in the TCA at § 47-25-1702(4).)
Who enters into Non-Compete Agreements?
Companies that frequently enter into non-compete agreements with their employees include 1) those who employ highly skilled employees; 2) those that have an important business secret/method that is crucial to their success; and 3) those that have a highly coveted client roster. These agreements are entered into to protect the company’s interests and investments.
What results when a Non-Compete Agreement is violated?
Many non-compete clauses specify potential damages that are to be awarded if the agreement is violated. Additionally, injunctions and monetary damages can be awarded to the prevailing party.
Prime Example: Chicken Tender Wars
Two of Nashville favorite chicken joints recently entered into litigation over a non-compete agreement. Otter’s Chicken employed an individual who had ownership shares and specialized knowledge about many facets of the business, including operations and preparation of the product. When the employee and Otter’s decided to go separate ways, they entered into a non-compete agreement. After the individual left the company, Otter’s alleged that the employee gave operational and trade secrets to a competitor, McDougal’s Chicken. The Court awarded Otter’s with injunctive relief against the former employee and the person had to return all information to Otter’s. (You can read the entire case here: http://www.tba2.org/tba_files/TCA/2011/otters_062811.pdf.)
How do I form a Non-Compete Agreement?
If you are ready to protect your business and the trade secrets that make your business successful, contact us today and we will draft your non-compete agreement so that you are protected.