I own a company that sells and repairs tires (Yes, a woman is very able to sell and repair tires! Let’s not stereotype here). I have four employees and am concerned that one of my best employees might leave my company, open his own company, and put me out of business. He is really smart and our customers love him. Is there any way to prevent this from happening? — Sheila
Touché! This should be a concern for any business that has employees. Unfortunately, I have seen too many companies suffer financially because one of their key employees leaves the business and opens up an identical business or goes to work for a market competitor in the same vicinity.
Yes, there IS something you can do to head off this problem. In the legal world, it is often referred to as a “Covenant Not to Compete.” Savvy business owners often require their employees to sign an employment agreement that contains a “covenant” (which is the legal term for a contractually binding promise) not to compete with their former boss.
Sheila, I'm sure you have worked hard to build your business, and you need to protect it! Your customer relationships, and their names, addresses, and telephone numbers as well as specific information about their tires, belong to you – not to your employee, even though he may have developed and nurtured the relationships.
But here's the catch: the Covenant Not to Compete must be “reasonable” in the eyes of the law — otherwise it won't be enforceable. Free enterprise is one of the fundamental aspects of our country.
So what's “reasonable?” Well, for starters, there must be time and geographical limitations in the covenant. No judge would enforce a covenant that says a former employee can’t open a competitive business within the entire state of Illinois for a period of 10 years. That is far too restrictive.
This week’s article just skims the surface of this very important concern that can mean life or death for a business. My future articles will go into more detail. In the meantime, please consult another attorney or contact me if you have concerns in this area. I offer a one-hour consultation at no charge to you.
If you would like to ask me a legal question, post it on the Lake Zurich Patch website or send your question to me at firstname.lastname@example.org.
Please be aware that this column provides only legal advice of a general nature. You should always consult with an attorney with respect to your particular legal situation.
As always, I extend you my very best!