[UPHPU] Legal Questions

Chris Wood chris at tincreek.com
Fri Apr 17 12:25:33 MDT 2015


On Fri, Apr 17, 2015 at 9:09 AM, David Skinner
<david.skinner.83 at gmail.com> wrote:
> All,
>
> My company is working on introducing some non-compete documents. I'm going
> through them to recommend some modifications. In the documents they state a
> non-compete period of 2 years following employee termination date.

In my experience with non-software companies here in Utah, 2 years is typical.

Things I have found/observed with my previous employers on this topic:

- California will not enforce a non-compete.  Make sure Utah law
applies (or other non-compete friendly states) to the agreement -- the
document should state which state law applies.  Or, don't hire anybody
in California to work from California if you want to enforce the
non-compete.  Ditto for anybody working out of the country -- you
can't really enforce those because of costs and distance.

- When you go to enforce a non-compete, usually you end up negotiating
with the new employer and the former employee.  I've seen a situation
where the employee ends up assigned a non-competing product line at
the new employer as part of the settlement.  Even if you don't stop
the employee from working for the competitor, through the discussions
you've made it clear to them that they can't use your information for
their benefit.

- A reasonable non-compete must not be over-reaching but also not
wimpy.  If a non-compete is unreasonable, a judge can choose not to
enforce it. E.g. if a person's career is programming in PHP, you can't
have a non-compete that prevents him from programming in PHP.  If he
programmed a very specific tool for you and then went to a competitor
to program the exact same thing 1 month later, then a non-compete
baring that is reasonable.

- Non-competes can protect things like client lists, vendor lists,
etc.  You don't want your employees walking out the door and creating
a competing company or working for a competitor using all of your
customer lists.  I've seen people hired solely because the competitor
wants to milk your former employee of as much information as they can.
You need a culture of confidentiality of information.

- If you have a non-compete, you need to enforce it.  If you
selectively pick and choose who you want to enforce it against, the
court will toss out your argument when you do want to enforce it.

- Make it clear up front that you have non-competes AND make sure they
are actually signed!  Some companies are very sloppy about the process
and an employee leaves for a competitor and you find out that employee
managed to not sign the document (or its missing).

- All too often, I've seen competitors created by partnerships.  A
company works with your company and they learn the process and then go
and compete with you later.  I've seen that with employees too.  Or,
with employees of your vendors.  Be careful you're not training your
future competitors in your day to day business.

Just my thoughts....


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