Starting business can be a scary endeavor. After all, there’s a lot of talk about how many businesses fail within a short period of starting. However, you can minimize your risks and maximize your chances of success by engaging in sound business formation and planning. As frightening as that may seem, competent business attorneys, like the legal team at our firm, can walk entrepreneurs through the process to protect their interests in both the short and long-term.
As you get your business up and running, one form of protection you may want to think of utilizing is non-compete agreements. These contractual arrangements disallow employees from working in certain fields, markets, and professions upon leaving your employ. The goal of the agreement is to secure an individual’s talents while minimizing the risk of him or her becoming an immediate competitor. This may include limiting a former employee’s ability to disclose information that is critical to your business’s success, such as customer lists, marketing strategies, pricing methodologies, and information related to research and development.
There are strict parameters surrounding non-compete agreements given the strict restrictions they place on the free market. Therefore, regardless of the agreement of the parties involved, certain factors may be considered when determining if a non-compete agreement is legally enforceable.
To start, should a dispute over a non-compete agreement arise, a court will consider the duration of the agreement. If the exclusion from competition last forever, then a court will probably deem it unenforceable. Therefore, should you choose to utilize non-compete agreements, you need to negotiate a realistic timeframe, which may depend on a number of factors such as the size of the market and the sensitivity of the talents and information possessed by the employee. However, Massachusetts law generally won’t allow for a restriction that lasts longer than a year.
Another consideration is the geographic scope of the restriction. Under Massachusetts law, the restriction can only be applicable to the area where the employee worked or had a substantial presence. The type of work performed, where it was performed, and the prevalence and notoriety of the work conducted therefore dictate the geographic scope of a non-compete agreement. To make it enforceable, you need to make sure that it is reasonable and is applicable only to the specific kind of work the employee performed while with your business.
There are a whole host of other requirements and restrictions pertaining to non-compete agreements. For example, under the state’s “garden leave” provision, an employer is required to pay a former employee 50% of his or her salary after leaving employment if he or she is subjected to a non-compete agreement. This may be quite costly to your business, so you’ll need to conduct some sort of cost-benefit analysis.
This area of the law is constantly evolving, and you need to stay on top of it if you want to keep ahead and ensure that you are utilizing it to your advantage. This can certainly be intimidating, but attorneys who are experienced in this area of the law stand ready to build a relationship with you to ensure that your needs are met as your business continues to grow.