During employment, many key employees inevitably gain access to a vast amount of information that is both unique and valuable to a business. This information can include customer lists, potential client lists, processes and operations information, trade secrets, or other important information that has been acquired by the business over time. For many businesses, it is necessary for key employees to utilize this information to build relationships with current and potential customers and to work with and access this information on a daily basis during employment.
But what happens when employment ends? How do you, as a business owner, prevent a key employee from taking this unique and valuable information when he or she leaves your business? Moreover, how do you prevent a key employee from sharing this information with a competitor employer, or using this information to directly compete with you and your business?
The answer depends largely on whether you are just now hiring the key employee, or whether the key employee is currently employed at your business. While it is best to speak with an attorney to determine which agreements, it any, are appropriate for your business, here is a brief overview of three frequently recommended documents:
When hiring new employees, the following three clauses and/or contracts can be preventative solutions to these potential problems. Depending on your business’s activities and operations, it may be advisable for you to have one or a combination of the following three documents:
(1) Non-Compete Clause or Non-Compete Agreement. Inserting a Non-Compete Clause in a contract for employment or having an employee sign a Non-Compete Agreement (Contract) prevents a key employee form working in your company’s industry or business practice area for a specified time period and within a specified geographic area after he or she leaves employment with your company. The specified time and geographic limitations must be “reasonable.” What is “reasonable” varies depending on the industry and business practice area, so it is advisable to consult with an attorney when drafting a Non-Compete Clause or a Non-Compete Agreement.
(2) Non –Solicitation Clause or Non-Solicitation Agreement: A Non-Solicitation Clause in a contract for employment, or having an employee sign a Non-Solicitation Agreement (Contract) prevents an exiting employee from soliciting your other employees and/or customers for a period of time after he or she leaves your company. This helps protect your business interests in retaining employees that you have invested time and resources to train, or customers who your business has developed a relationship with, It does so by prohibiting the exiting employee from attempting to entice other employees or customers to also leave your company.
(3) Confidentiality Clause or Confidentiality Agreement: A Confidentiality Clause in a contract for employment, or having an employee sign a Confidentiality Agreement (Contract) prevents a key employee from disclosing sensitive company information, such as customer lists and related information, company processes or operations, or trade secrets or future company strategies.
When dealing with current employees, the question of whether an employer can require existing employees to sign Non-Compete Agreements or Non-Solicitation Agreements as a condition to continued employment has not been clearly answered by the Connecticut Courts. It is often required that some form of valid “contractual consideration” be given to the employee in exchange for the employee signing the Non-Compete or Non-Solicitation Agreement.
In many circumstances, requiring an existing employee to sign a Confidentiality Agreement as a condition to exposing them to confidential information within the office is an acceptable practice. Again, it is advisable to consult an attorney to determine the legality of these Agreements and Clauses for your specific business in your specific business situation.