Will a Non-Compete Agreement Protect my Business?

By Lane V. Erickson, Idaho Business Attorney

Employees may be an important part of your business. Additionally, you may have relationships with independent contractors such as marketers or salespeople who provide services to you or your business that are important for its success. Whatever the situation is, these people may be vital for the success of your business to continue operating into the future.

When these people understand your business processes or when they have developed relationships with your clients, other employees, or suppliers, they become key to your business operations. In these circumstances, every business owner would be wise to ask themselves the question, “What would happen to my business if these individuals stopped working for me?” Additionally, a business owner should ask themselves what would happen to my business if these individuals began competing against my business directly or working for a competitor.

By understanding the effect these employees and independent contractors could have on your business, if they are no longer working for your business, you have the ability to decide whether a non-compete agreement would be useful in protecting your business. Our Premier team of Idaho business lawyers at the Racine law office have worked with business clients for more than 70 years in making these types of decisions.

Would a non-compete agreement be an important part of protecting your business? The purpose of this article is to help you decide if it would.

To start off with, a non-compete agreement is a written contract that is signed by the employee or independent contractor and that controls what they can and cannot do after they are no longer working for your business. In other words, a non-compete agreement, when valid, can prohibit a former employee or independent contractor from competing against your business either directly or indirectly.

A non-compete agreement as a contract is binding on the parties regardless of whether they terminate their relationship with you voluntarily or involuntarily. To accomplish this, the agreement should be in writing. Additionally, the agreement should be specific in each of its terms and conditions. Finally, the agreement needs to be signed and dated by both you and the employee or independent contractor.

By having a written, signed and dated non-compete agreement you are providing protection for your legitimate business interests as your business moves forward. You do this by being specific in the written agreement about the limitations better placed upon your employee or independent contractor. These limitations only come into effect after their relationship with you terminates.

The limitations, to be enforceable, have to be very specific. For example, you must specifically state the time that the non-compete agreement will be enforceable and binding on the employee or independent contractor. This usually begins when the relationship terminates. The time frame then will be for a specific length of time, such as 6 months or one year or so forth.

The limitations also need to include a specific geographical area. This could be a specific location or a reasonable radius within that particular location. In other words, if all the business you do is done in a certain city, you can prohibit the employee or independent contractor from competing against your business in that city.

Keep in mind that any limitations you put in the written non-compete agreement have to be reasonable. In other words, the timeframe can’t last forever, and it can’t cover the entire world. It is always best to keep a shorter time in mind and a specific geographical area than it is to be too broad. The reason for this is that if the non-compete agreement is deemed to be unenforceable, you will lose all the protections that you were working to get in the first place.

Speaking of enforceability, Idaho law does support and enforce legitimate non-compete agreements. Specifically, statutes relating to non-compete agreements are found at Idaho Code §§ 44-2701 et seq., Which describes the defaults that a non-compete agreement can have to be enforceable.

These statutes were created because prior to their creation, numerous Idaho cases existed concerning non-compete agreements. However, these cases were confusing and sometimes difficult to understand and to enforce. The statutes made the process of enforcing a non-compete agreement much simpler.

If you have questions about whether using a non-compete agreement would be a smart part of your business practice, we can help. We are experienced in this area of the law and have helped numerous business clients through the process of creating and enforcing non-compete agreements as part of their business.

Our team of Idaho business lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877-232-6101 or 208-232-6101 for a free consultation. You can also email us directly at lane@racineolson.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.