Non-compete agreements must be crafted carefully to be legit

Think that non-compete agreement you had your sales manager sign is going to keep her from taking customers with her when she leaves?

Better think again, especially if your mindset includes taking the sales manager to court to protect your interests. Non-competes are complicated.

"Yes, non-competes work," says attorney James L. Poznak. "But," he quickly adds "courts don't like them."

That's a huge complication because you may have to go to court -- or at least threaten to do so -- to enforce an agreement.

On the other hand, sometimes the mere existence of a signed non-compete agreement is enough to keep your customer base -- or other interests -- safe.

Non-compete agreements are a legitimate small business management tool, though you'll likely need an attorney to draw up an agreement that can be enforced.

The enforceability issues are both esoteric and practical.

"Public policy promotes free trade, and courts tend to see non-competes as a restraint on free trade," explains Poznak, principal of Poznak Law Firm Ltd., Oak Brook (and, so you know, my company's attorney).

Still, he says, "if the employer has a so-called protectable interest and the non-compete is not overbroadly written as to duration, geographic scope and activity," then your non-compete may stand up.

Here's a list of things to know about non-compete agreements:

• Protectable interest. You must have a legitimate business concern for a non-compete agreement to be enforceable. An otherwise "understandable desire to avoid competition isn't a protectable interest," Poznak says.

If an employee has long-term connections with your customers that are the result of normal contact through your business -- for example, a service technician who relates to customers because he works for you -- a non-compete that keeps him from contacting customers if he leaves is probably enforceable. However, you likely can't enforce a keep-your-hands-off-my-customers agreement for a back office employee who has no direct customer contact.

• Pay structure. Your non-compete probably won't fly if the employee is paid on commission and developing her own sales territory, even though she's working on behalf of your business.

• Geography. Keep the restraint narrow. If yours is a Palatine business with Palatine customers, a Cook County-wide restriction likely won't work.

• Trade secrets. Poznak's example is a printing process that "truly is a trade secret." You likely can stop a former employee from using that process.

• Time. Non-compete restraints that go beyond one to three years are "very hard to enforce," Poznak says. "Less than a year" is a far more enforceable non-compete timeframe.

• Money. A nominal signing fee that serves as compensation for the signing of a non-compete helps. The signing fee can be as little as $50, Poznak says.

• Termination. Firing an employee without cause -- a situation that might need a pre-termination chat with an attorney anyway -- will likely void any non-compete, Poznak says.

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