The past decade has seen a rise in litigation related to non-compete agreements of at least 61%, as reported recently in the Wall Street Journal. The Journal goes on to note that not only is this a monumental change, but that the real number may be even higher as many cases go unreported thanks to out-of-court settlement. Is your business at risk of being the target of one of these lawsuits?
Once reserved exclusively to the most senior management employment contracts, the desire to protect trade secrets and retain customer goodwill has resulted in non-compete clauses growing more and more common from the top of the corporate hierarchy to the bottom. One additional benefit that employers discovered as non-compete clauses became used more is that employees subject to the clauses leave their current employment at a notably lower rate.
While big businesses can more readily afford the risks of facing litigation by a new hire’s previous employer, a chill has spread through startups and many small businesses. Access to qualified prospective employees has grown limited thanks to the fear of litigation surrounding non-compete clauses–HR departments have grown wary of candidates they know to come from a company with a history of rigorous contract enforcement.
The danger posed by the litigation varies greatly from state to state. The California Business and Professions Code renders non-compete clauses almost entirely void, leaving them nearly unenforceable. Minnesota makes enforcement much easier–provided the terms are reasonable — giving the litigator more leeway in pursuing their cases.
If you are a business owner considering using non-compete agreements to protect your investment in employees or intellectual property – or want to hire someone with an existing non-compete — you should consult with a Creative Business Lawyer™. You will want to make sure that the terms of your non-compete are enforceable if push comes to shove, and you’ll want to make sure that you’re not getting more than you bargained for with your new employee.
To learn more, see our Hiring & Firing page and be sure to download our Guide to Avoiding Non-Compete Litigation.
If you’re a small or mid-size business owner, call us today at (612) 206-3701 or fill out our contact form to schedule a business consultation session.
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