American Workers For American Companies

Thursday, September 8, 2011

Non Compete Clauses - Do You Need One?

If you are in business you should consider whether or not to have some type of non-compete clause (NCC) if you have employees or independent contractors. The trouble is, many people are not exactly clear on what a non-compete is or what it can entail.

A good rule of thumb includes these points:

1.        Have you invested a lot of time, money and resources in to the training of your employees or independent contracts?  If yes, than you probably want to protect the information you have given them by having a NCC or CNC.

2.       Your employees/contractors are privy to specific information and proprietary information that you simply can’t afford to have in to the hands of your competitors.

3.       If you have a similar group of employees/contractors they should all sign the same agreement.  Having one or two sales people sign one and the others not, is not a good ethical practice.  It also raises the question as to whether or not those people really needed to sign it.

4.       There should be a benefit to signing it.  A benefit may simply be, if you sign it, we’ll hire you.  Or it could mean a lateral or horizontal move in the company (a raise or move to a different department or the adding of new responsibilities).

According to,  A non-compete clause (often NCC), or covenant not to compete (CNC), is a term used in contract law under which one party (usually an employee) agrees not to pursue a similar profession or trade in competition against another party (usually the employer).”  (Wikipedia, The Free Encyclopedia)  References Alger v. Thacher, 36 Mass. 51, 52 (1837); the California Business and Professions Code.

It can often be a part of a contractual agreement and term of employment.  You simply must sign it to work for them.  It protects the company from people who want to share trade secrets and information about their employer with one of the company’s competitors.  Fortunately the courts have decided that a typical NCC or CNC will be upheld in a court of law as long as it contains specific information in regards to geography and a reasonable period of time after employment.  However, the courts also give a lot of merit to whether or not a NCC or CNC restricts a person from gaining employment. 

When deciding whether or not to have a NCC/CNC you need to take some time to consider your goals and ask yourself why you want people to sign it.

For more helpful information contact a local employee benefits attorney or talk to your business attorney.  In the southeastern Wisconsin area we are proud to recommend Attorney Mark C. Young of Trapp & Hartman, S.S. 19395 West Capitol Drive, Ste 200, Brookfield, Wisconsin. They can be reached at 262-373.6053 or