Non-Compete Agreements Enhance Your Company’s Value

Non-Compete Agreements –Enhance Your Company’s Value

Many companies realize the value in their confidential information and their human capital, and proactively protect those assets by having key employees (or all employees) sign some form of non-compete or confidentiality agreement as a condition to their employment.  For those that haven’t already done so, putting these forms of agreements in place can be one of the easiest quick fixes that can enhance your company’s value.

Numerous recent surveys show that as the economy improves, companies can expect their top performers and “rising stars” to seek out opportunities at other companies, possibly with direct competitors.  Coincidentally, for many companies, their greatest value lies with their people and with their collected information and experience.  You may have developed customer lists and sensitive pricing information that must be kept confidential from your competitors, or you may have invested significant time and resources in developing an experienced and well-connected staff of salespeople, administrative staff and production employees that could cause significant damage if they took their talents (and their knowledge) elsewhere.

Non-compete agreements give you the ability to obtain a measure of protection from losing the valuable investment you have made in your information and your people.

If you plan to sell your business someday, this is also one of the first areas that a prospective buyer is likely to look when “checking under the hood” of your business – the concern being whether there could be any disgruntled former employees that could misuse confidential company information.

The law of non-competes varies greatly from state-to-state and can be quite complex and sensitive to very targeted drafting, much more than most areas of transactional law.  In California, for example, non-competes are unenforceable in most circumstances, but can be enforced against a seller of the business.  In contrast, Iowa and Illinois generally allow non-competes that are reasonable in duration and geographical scope.

Thompson & Thompson LLP assists clients with these forms of agreements as a regular part of its practice, and also maintains a strong relationship with attorneys at Seyfarth Shaw, one of the top firms in the country in labor and employment law.  Preparing these agreements is usually a discrete project providing a great deal of value relative to its cost, and can be quickly integrated with your HR department’s hiring and personnel administration processes.  If you would be interested in receiving a review of your company’s protection of its confidential information and human capital, please feel free to contact us to set up a short initial consultation.

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