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How Non compete Agreements Protect Your Business

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Katlyn Graham:  Hello, I’m Katlyn Graham. I’m here with Jeff Doherty, an attorney at MacLean Holloway Doherty Ardiff & Morse. Jeff specializes in corporate law. Welcome Jeff.

Jeff Doherty:  Welcome. Thank you.

Katlyn:  Thanks for joining us today.

Jeff:  Thanks for having me.

Katlyn:  We’re discussing non‑compete agreements today, an area that you specialize in. For those who may be unfamiliar, Jeff, what is a non‑compete agreement?

Jeff:  A non‑compete agreement is simply an agreement that prohibits an employee or former employee from entering into a competing business for a particular duration, over a particular geographic area.

There are different types, different flavors of non‑competes. Oftentimes, those flavors get mixed up and are simply called a non‑compete.

For example, a non‑compete is that simply says that you can’t work for a competing business over a particular period of time, in a particular geographic location. That’s non‑compete.

There’s also a variety that’s called a non‑solicitation agreement. We deal with these frequently. I think my firm ‑‑ and me in particular ‑‑ I favor non‑solicitation agreements, because they more closely relate the interests that the employer is seeking to protect, with the restrictions that are placed on the employee.

A non‑solicitation agreement simply says that you can’t solicit any of the employees, customers, vendors, or whoever are the key contributors to your business after you separate from service, for a particular period of time. That more closely relates the interests of the employer in protecting his goodwill, and protecting his trade secrets, vis‑‡‑vis the exiting employee.

Katlyn : I see. How else does a non‑compete agreement help an employer keep their employees?

Jeff:  It doesn’t really. If you’re using a restrictive agreement like a non‑compete, or a non‑solicitation to retain employees, that’s really a bad proxy. Really, what you should be doing is creating a very good work environment. Creating a place where employees want to remain. In a Draconian context, if you were to say to an employee, “You can’t work in a competing business.”

You retain employees by virtue of inertia. The employee has to stay here if they want to be employed. The law doesn’t favor that approach. If that’s your objective, you’re very likely to be frustrated in obtaining that objective.

Katlyn:  So, non‑compete more, those agreements tend to protect company secrets more than keep their employees. That’s their main goal?

Jeff:  Exactly. One of the important considerations for business owners.

We always consult with business owners when we meet with them and say, “What is the objective here? What are you trying to accomplish with this restrictive agreement?”

Often, they’ll say, “Well, this is a key employee. If he were to go work for a competitor, he knows all my inside information. He knows all my customers. He knows all of our trade secrets.”

That’s a legitimate interest that a business owner has to protect. We always council them, “Make sure that what you’re seeking to protect is legitimate. It’s not simply trying to prevent an employee from making a living.”

In that regard, non‑competes and non‑solicitations, for that matter, can facilitate an employer’s ability to restrict access to that information, restrict the employee’s ability to use that information outside of the employment relationship with a particular employee and employer.

In that regard, it helps protect the trade secrets.

Katlyn:  I see. I would expect that there are some limitations of non‑compete agreements.

Jeff:  Certainly. In Massachusetts, in particular.

Most states nowadays are disfavoring non‑competes. The reason being is that there is a strong public policy perspective from the government that employees should be free to work wherever they choose to work. A non‑compete or a non‑solicitation agreement that restricts that is going to be disfavored.

However, the law recognizes that there are legitimate business interests that should be protected. A non‑compete or a non‑solicitation is one way to do that.

In order for a non‑compete agreement to be enforceable in Massachusetts, it has to be both limited in geographic and temporal scope. Time and location has to be supported by consideration, in light of the obligations that you’re asking the employee to be restrictive from and, also, has to be not against public policy.

Katlyn:  It sounds like you really need to be careful with your words in these non‑compete. Do most people hire a lawyer to work this out?

Jeff:  It’s funny. They should, for the very reason that this area of the law is evolving very quickly. There is case law pending. There is legislation that’s pending. It’s evolving very quickly.

Very often, we see either employers or employees who ventured into non‑compete agreements or non‑solicitation agreements ‑‑ for that matter ‑‑ come into our office, sit down with us. They’ll say, “Well, is the agreement I signed.”

We’ll look at it. We’ll say, if it’s from the employee’s perspective, “Well, this is very, very one‑sided ‑‑ one‑sided against the employee. So, it’s not in the employee’s interest.”

They signed an agreement that they’ve got in and, now, try to get out of. That’s a hard standard to overcome.

On the flip side, very often we see employers come in. They say, “Well, I pulled this employee’s non‑compete agreement off the Internet, and I’ve had them sign it. And what do you think?” We’ll look at it.

We’ll counsel them and say, “Well, you know, there are some problems with this agreement because the form that you used doesn’t really relate to your business. You know, you might be in the manufacturing business, and this is a scientific business where the standards of conduct and the issues that are in play are very different.”

It’s not a “one size fits all” type of situation. You have to be very careful on how the agreement is worded. You have to be mindful of getting the objective that you seek to obtain.

If you want the agreement to be enforceable, you have to know that it’s enforceable. If you just pull something off the Internet, it’s not likely to be that way.

It’s not a very expensive exercise to go through. We discourage our corporate clients from self‑help in this regard.

Katlyn:  [laughs] Get some expert advice.

Thank you, Jeff, so much for joining us today. For more information, you can visit the firm’s website at mhdpc.com or call 978‑774‑7123.

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Jeff:  Thank you.

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Transcription by CastingWords

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