116. What’s a Non-Compete Agreement & Can I Use One?

What’s a Non-Compete Agreement & Can I Use One

Listen Now:

In this episode of Sam’s Sidebar Q&A, Henri asks:
How do you go about getting a non-compete from someone after you’ve stopped working with them?
Great question — let’s dive into it!

In this episode, you’ll hear… 

  • What a non-compete agreement is
  • Whether or not you would be able to enforce a non-compete
  • Alternatives to non-competes that could serve you better

Listen to the full episode of On Your Terms™ on your favorite podcast platform

Listen to episode 116, follow along so you never miss an episode, and leave a review to help introduce the show to more online business owners just like you!

What is a non-compete agreement / clause?

Employers use non-compete clauses/agreement to keep their employees from being able to work for competitors for (a) a limited period of time, (b) within a certain geographic location, and (c) for a specific area of expertise/work.

Some states don’t allow non-competes at all (looking at you CA, ND, OK). Others have no ban at all. Others only ban certain professions or low-wage workers from being subject to non-competes.

Basically, non-competes are super tricky.

Oh and we haven’t even talked about non-competes for contractors yet — woooof! That’s even stickier (and probably not a good legal idea).

So here’s the deal

If you’re really concerned about an employee working for a competitor and you’d like to explore a non-compete agreement — get it in place before or while they work for you.

There needs to be what we call “consideration” in exchange for signing a non-compete – which when hiring them is the offer/salary, and while continuously employed is continuous employment/salary.

Non-competes should be carefully crafted by an attorney in your area who understands what your state’s laws are around them. They will also be familiar with your employee’s state’s situation.

And don’t forget about non-solicitation and non-disclosure clauses too 🙂 (You’re bringing me back to my corporate lawyer days, Henri, where I used to write these all the time!)

Episode Transcript

Download Episode Transcript

Sam Vander Wielen: Hey. It’s Sam Vander Wielen. Welcome back to another episode of On Your Terms. This episode is going to be tackling a legal question about non-competes, which I’m really excited to talk about because there’s actually a lot of development and stuff going on with non-competes right now.

So, let’s hop in and talk – actually, wait. I can’t hop in and talk about it. I’ve got to give you a Norm Tip. So, if you missed it in my last episode, I told you that because this month is the month that my dad passed away last year, I’m going to be doing a little Norm Tip at the beginning of every single episode.

So, this tip is going to be from Norm to you all about Costco, his other favorite place. Earlier this week, it was about Trader Joe’s. Now Costco, his other favorite place. So, my dad was just adamant that if you saw something at Costco that you liked, you had to buy it, you had to return it, it was fine. But his go-to phrase was if you see something at Costco and you like it, you got to get it. And so, we would always say that because he would just harp on about how things at Costco would rotate in and out and you never knew if it was going to come back, and blah, blah, blah.

He also taught me that when prices end in a 97, it means that they’re moving it out, they’re phasing it out, they’re not going to have any more of it, there’s no more stock coming. So, that was just a really funny thing, but I think about it every single time I go to Costco and I’m like, "Should I get it? Should I not get it? If you see something at Costco, you got to get it." So, that’s what I do. And they have a really good return policy if you really end up not needing it.

All right. Let’s get into this week’s question from Henry. Henry asks, "How do you go about getting a non-compete from someone after you’ve stopped working with them?" That’s such a good question, Henry. So, you probably don’t go after somebody to get them sign a non-compete afterwards. You could always go speak to your own lawyer, of course, to see if, for some reason, your circumstances allow it.

But, first, let’s dive into what’s a non-compete agreement, what’s a non-compete clause. So, employers use non-compete clauses and agreements to keep their employees from being able to work with competitors or to start a business of their own that becomes a competitor for (A) a limited period of time, (B) within a certain geographic location, and (C) for a specific area of expertise or work.

So, you can’t block people, you know, if you’re a doctor’s office and you have a non-compete with your other doctors, you can’t say that they can never go become a plumber. It would be specific to being a competitor to that exact work. And so, that’s actually a funny example because I used to do a lot of non-compete work when I was at the firm for physicians, and a lot of times states wouldn’t even actually enforce those non-competes because there are also public policy thoughts about how, let’s say, for example, I handled a case about a nephrologist once and they needed more nephrologists in this area, the kidney doctors. And so, they needed more nephrologists in this area and public policy did not allow for you to block somebody from working in an area where nephrology was really, really needed. You know, it’s a public health crisis. So, it’s just interesting.

But that’s essentially how we think of non-competes, it’s for a limited period of time within a certain geographic location and for a specific area of expertise. So, some states, though, don’t allow non-competes at all. Here’s looking at you California, North Dakota, Oklahoma. Others have no ban at all, they allow non-competes. Others only ban certain professions or they ban low wage workers from being subject to non-compete. So, it really depends on where you live.

I think in a nutshell, non-competes are super tricky and we haven’t even talked about the fact that non-competes are even trickier for contractors. That’s an even stickier, I think, area. It’s probably not really a good idea. When people reach out to me and they ask me about non-competes with contractors, I’m always like, "Well, I hope that’s not because you’re treating them like an employee." And I have an episode about that which I can link to below. I have an episode about making sure you’re treating people like employees versus independent contractors.

So, here’s the deal, if you’re really concerned about an employee working for a competitor and you want to explore a non-compete agreement with them, you want to get it in place before or while they work with you or for you. There needs to be what we call in the law consideration in exchange for signing a non-compete. So, that’s when hiring them is the offer or the salary. And then, while continuously employed, it’s offering them continuous employment and continuing to offer them their salary if they sign this thing in exchange for taking the job or continuing to perform the job.

Non-competes should also be carefully drafted by an attorney in your area who understands what your state’s laws are around them, and then also the state’s law of wherever your employee is, if they’re virtual. They should also be familiar or at least able to research your employees’ state situation.

And I often think that for whatever reason, non-competes get a lot of attention, but you don’t want to forget about non-solicitation and nondisclosure clauses too. So, non-solicitation clauses are ones that you can put in place that keep the person, the employee from being able to solicit your customers and/or your other employees and contractors.

So, sometimes when people leave a company, they’ll try to take a bunch of your employees with you. Or if they were leaving to start their own company, they could contact a lot of your clients and try to take your clients. It also includes not just your actual clients, but people on your email list, all that kind of stuff. So, I think non-solicitation is just as important as non-compete.

Nondisclosure clauses, it’s essentially a confidentiality clause where they’re required to keep what they’ve learned from working with you and what’s really your secret sauce. Not general knowledge, but your trade secrets, your customer list, your processes, all that kind of stuff. They are not allowed to share with other people and they can’t use for themselves. So, non-solicitation and non-disclosure clauses are just as important as non-competes, if not, maybe more sometimes. So, I would definitely think about all of those.

I hope that this was helpful. I will link to that episode below about the employee independent contractor breakdown because that’s an important, I think, add-on to having this conversation. I hope that this was helpful. If you listen to the show and you like it, please leave a quick rating or review wherever you listen to podcasts. And I can’t wait to see you here next week.

Thanks so much for listening to the On Your Terms podcast. Make sure to follow on Apple Podcasts, Spotify, or wherever you like to listen to podcasts. You can also check out all of our podcast episodes, show notes, links, and more at samvanderwielen.com/podcast. You can learn more about legally protecting your business and take my free legal workshop, Five Steps to Legally Protect and Grow Your Online Business, at samvanderwielen.com. And to stay connected and follow along, follow me on Instagram, @samvanderwielen, and send me a DM to say hi.

Just remember that although I am a attorney, I am not your attorney and I am not offering you legal advice in today’s episode. This episode and all of my episodes are informational and educational only. It is not a substitute for seeking out your own advice from your own lawyer. And please keep in mind that I can’t offer you legal advice. I don’t ever offer any legal services. But I think I offer some pretty good information.

 

If you’d like a shoutout (and a chance to win a $20 gift card), just leave a review on Apple Podcasts and send a screenshot of it to me on Instagram via DMs!

Resources Discussed in This Episode

If you’re ready to legally protect and grow your online business today, save your seat in my free workshop so you can learn how to take the simple legal steps to protect the business you’ve worked so hard to build. Click here to watch the free workshop so you can get legally legit right now!

LEARN:

  • Read Sam’s Blog for the latest legal tips, podcast episodes & behind the scenes of building her seven-figure business.
  • Listen to our customer stories to see how getting legally legit has helped 1,000s of entrepreneurs grow their own businesses.

CONNECT:

FAV TOOLS:

  • Kajabi // use Kajabi to sell your course, program, or even build your entire website. Get a 30-day free trial with my link.
  • SamCart // what I use for my checkout pages and payment processing and LOVE. And no, not because it’s my name.
  • ConvertKit // what I use to build my email list, send emails to my list, and create opt-in forms & pages

DISCLAIMER: Although Sam is an attorney she doesn’t practice law and can’t give you legal advice. All episodes of On Your Terms are educational and informational only. The information discussed here isn’t legal advice and isn’t intended to be. The info you hear here isn’t a substitute for seeking legal advice from your own attorney.

© 2022 Sam Vander Wielen LLC | All Rights Reserved | Any use of this intellectual property owned by Sam Vander Wielen LLC may not be used in connection with the sale or distribution of any content (free or paid, written or verbal), product, and/or service by you without prior written consent from Sam Vander Wielen LLC.

AFFILIATE LINKS: Some of the links we share here may be affiliate links, which means we may make a small financial reward for referring you, without any cost difference to you. You’re not obligated to use these links, but it does help us to share resources. Thank you for supporting our business!

On Your Terms is a production of Nova Media

0 Comments
Join The Conversation

So What Do you think?

Share Your Thoughts

Your email address will not be published. Required fields are marked *

Register for my FREE legal training

5 Steps To Legally Protect & Grow Your Online Business

SAVE YOUR SEAT NOW!

You May also like