A non-compete and non-solicitation agreement can help protect your business. It’s a legal contract that limits an employee’s ability to contact and solicit former and current clients, as well as colleagues, once they resign. It also restricts them from using or sharing confidential information and competing against the employer for a certain amount of time.
A well-drafted non-compete and non-solicitation agreement can help business owners prevent unfair competition. However, courts often refuse to enforce these contracts beyond what’s reasonably necessary to protect the business. By avoiding the following mistakes, you can help ensure your agreement will be upheld in the courts.
1. Using Standard Forms
Using standard non-compete and non-solicitation agreement templates may save time and increase efficiency in the process, but not tailoring the contract to the employee who will be signing it is a mistake. The agreement should include the employee’s key details, such as their position, their duties, their employee status, their seniority, their industry experience, and even their level of contact with clients.
Boilerplate language may ultimately make your restrictive agreement too broad. Failure to include these details may mean you haven’t adequately described the employee’s duties and obligations to your business, which could lead to the contract being non-binding.
Such a contract will likely be unenforceable if it is too broad in scope. Excessively long durations and geographic scope, for example, may be deemed unreasonably restrictive. Be specific to avoid problems.
3. Failure to Consider Jurisdictional Differences
If you have operations all over the country, you’ll need to use different agreements by location. Using the same boilerplate template for employees in all locations may have negative consequences. Each province has its own employment laws, and while the contract may be legal and binding in one province, it may be unenforceable in another. Failure to account for these differences in provincial employment legislature is a common mistake to avoid.
4. Not Taking Job Changes into Account
If job changes, such as a promotion or transfer, have occurred since the drafting of the agreement, and these types of changes were not accounted for, your contract may become obsolete and unenforceable by law. It’s good practice to update existing agreements when significant job changes occur.
5. Not Updating the Contract
Over the years, employment laws change. What may have been legally binding just a few years ago may not be enforceable today. At the same time, courts are often hesitant to enforce agreements that were signed several years ago by long-standing employees, particularly if the employee does not remember signing the contract. Thus, non-compete and non-solicitation agreements should be updated at regular intervals, such as annually.
6. Not Providing Detailed Definitions
To prove that a former employee’s activities are in violation of your agreement, the terms compete and solicitation must be well-established and defined. For example, an employee may say a former client contacted them first, thus arguing that they did not solicit them away from the business. An employee may also use a third party to reach out to a former customer to get around your terminology. You’ll be better served by using language that spells out exactly what the employee may or may not do, including the definition of indirect solicitation.
Your non-compete and non-solicitation agreements may seem sound, but if an issue crops up, you may realize too late that the language used in the contract is not sufficient to enforce it. To ensure your clauses are binding should the issue move to the courts, it’s best to contact an employment lawyer to carefully draft the agreement and ensure its enforceability. Otherwise, your efforts may be futile. Why leave such important agreements to chance?