Maryland Small Business & Non-Compete (& Non-solicitation) Clauses: Why you need them, what they’re worth, and why you need a carefully drafted contract
Every small business has secrets. Not necessarily secrets in a bad way, but secrets and methods of doing things that are different than their competitors. It’s what gives your small business a leg up on the competition. You may be the owner of a Maryland cleaning company, a software company, or a trucking company, but your small business does things in a way that only you and your employees know about and you have a right to protect your clients and your know-how that you have spent a lifetime building.
Non-compete agreements – Why you need them:
Employees quit, resign, get fired, or are laid-off. These employees are attractive targets for your competitors (even if they were not great employees) because they have knowledge of you, your practices, and your clients (and maybe they have pocketed your client phone numbers). Your only tool to prevent these employees from exploiting their time working for you is through agreements such as a Non-compete agreement and a Non-solicitationagreement. If the employees violate the agreements you can seek injunctive relief to prevent the employees from doing so.
What they’re worth:
As a lawyer representing many Maryland Small Business owners, I regularly see self-drafted non-compete agreements. Either these agreements are too broad or too narrow and will NOT be enforced by a court. The whole idea behind these agreements is two fold:
- To prevent your hard work from walking out the door with your employee.
- To make them legally enforceable.
If these agreements are poorly drafted, courts will not enforce them. Overbreadth is generally the biggest problem. Here’s an example:
- Company A is an engineering firm and it drafts a non-compete/non-solicitation agreement that it has all CAD operators sign that says, “you agree that if you leave Company A you will not work for any other engineering firms in the entire Mid Atlantic Area (defined as Pennsylvania, New Jersey, Delaware, Virginia, and Maryland) for a period of 5 years.
Clearly this is over broad, as it prohibits an employee from practicing their chosen trade, CAD drafting. A more useful agreement may limit the time restriction to 18 months and may limit the engineering firms either by name of direct competitors OR will specifically state that the firms will do work in certain types of sectors, like civil engineering.
Why you need a carefully drafted agreement:
If you cannot enforce your agreement, it is not worth the paper on which it’s printed! As a Maryland Small Business lawyer, I will sit down with clients and help them craft Non-Compete agreements that are reasonable in size, scope, and duration (that is the exact language courts use). Boilerplate agreements (ones found on the internet) are often not carefully worded enough and are either too broad or too narrow. Also, you need someone to draft the agreement who will understand your business and try to maximize the amount of leverage you have over exiting employees to prevent client theft!
The bottom line:
Isn’t your business worth protecting? Just google “non-compete” lawyer and see how many attorneys will advertise that they can beat your Non-Compete agreement. A poorly drafted agreement is just as bad as having none. Don’t let employees can steal your hard earned knowledge. Contact your favorite Maryland Small Business lawyer for a free analysis.