The first question you will likely ask is “do you really need a non-compete?” When answering that question, you should ask yourself the following:
- What have you worked so hard to protect?
- How would you be harmed if someone walked away and used your hard work against you?
Some typical examples of what you should want to protect are customer, client and patient lists, pricing lists and internal procedures that you developed. But there are many other examples.
The next question you will likely ask is “why should you hire a lawyer – can’t you use one of those generic forms online?” But there are at least four warning flags to be wary of if you use a generic form:
- Are you using the applicable state law?
- Are you following the legal requirements to enforce the non-compete in the state where it should be enforced?
- If it doesn’t comply with the law, will the agreement even be enforceable?
- What happens if it doesn’t comply?
When determining whether you are using the applicable state law, you have to consider the following:
- Where you are doing business;
- What determines where you are doing business; and
- What law applies to the parties subject to the agreement.
The general requirements of an enforceable non-compete are as follows:
- In writing and signed by all the parties to be bound;
- Reasonable time, area and line of business;
- Legitimate interest must exist to justify the restrictive convenant; and
- The non-compete must be reasonably necessary to protect that legitimate business interest.
Determining what is a reasonable time, area and line of business depends on the type of business you have. If you use the wrong time and area, the restrictions may not be enforceable and you may find yourself in court where the judge will decide the terms.
As a result, the very reason you used a non-compete and the expectations you hoped to get will not have been met.
In my next blog on the series of Maintaining a Competitive Edge, I will discuss what happens if you draft the agreement correctly and what happens if you draft it incorrectly.
The contents of this blog and website are for informational purposes only and do not constitute legal advice. Use of and access to this blog and website do not create an attorney-client relationship between the user and Iurillo Law Group, P.A.