Non-Compete Agreement Best Practices

This Non-Compete is Not Worth the Paper It’s Written On (Sometimes)

In our unscientific recollection of rumors heard around Indiana and Michigan workplaces, there seems to be a widespread belief among employees that they can’t be held to their non-compete agreements. Many times, employers believe the opposite, that their non-compete agreements are iron-clad. In both cases, these opinions often arise from almost no research or analysis.

In truth, the law regarding agreements not to compete, agreements not to solicit, and the related doctrine of trade secrets is intricate. An agreement that can be enforced in one industry or against a particular employee might be found invalid for a different industry or employee. Indiana law differs from Michigan law, and both of those differ from the law in other states. That’s why you normally won’t hear a lawyer saying a non-compete agreement is either worthless or iron-clad. It’s usually more nuanced. And that doesn’t even consider the costs and practical considerations that go into when and how to enforce or fight a non-compete or trade secret battle. This is one area where the old adage is true: You need to consult a professional.

But some general non-compete agreement best practices will help employers and business owners when hiring new employees. If your new talent came from a competitor, you should take a few steps to protect your business.

First, find out if the employee has a non-compete agreement. Get a copy. Study it. Consult with your lawyer if you have questions.

Second, with or without an agreement, clearly, communicate to your new hire in writing that you are not hiring him or her to gain access to a competitor’s trade secret information. Instruct the employee not to bring or use the competitor’s information in your workplace.

Finally, make a decision and clearly communicate to the new hire again, in writing who will pay the legal expenses if the competitor sues its former employee. There may be circumstances where the company will wish to defend its new employee. But in most cases, you should leave that to the employee.

With a little bit of planning, you can save a lot of trouble in an area of the law that is not as simple as some people believe.

Disclaimer: The THK Legal Blog is for informational purposes only and should not be relied upon as legal advice. In no case does the published material constitute an exhaustive legal study, and applicability to a particular situation depends upon an investigation of specific facts. You should consult an attorney for advice regarding your individual situation. All THK blogs are considered advertising material by the Indiana Bar Association.