Non Compete Agreements

Lisa In Iowa

My company is in the wireless phone business. We have a portion of our marketing team that provides both technical, sales, and product training to outside dealers and telephone companies that also sell our product. In the past because these employees were not sales staff, we have never had them sign a non compete agreement. However, we have concern that as some of the dealers and phone companies get larger, they see the advantage of having a full time "trainer" on their payroll to assist them instead of having our company provide them with the service. Without having employees sign an agreement, we have concerns that they could solicit our staff for employment. By taking our staff, we not only lose their business, but we also lose well trained staff. Obviously if we decide to pursue this, we will seek the assistance of legal counsel.

However, before doing so, my general question for the Forum is if we decide to implement non compete agreements for employees in the training position, can we require that our current staff sign the document as part of their employment, or can we only start using the document with new hires, which we would make aware of at the beginning of the recruitment process? If we are able to make all current staff sign it, can we terminate them if they fail to do so? That seems harsh, but was just wondering what my initial options would be.

Thanks!

System

Each state has its own law with respect to this issue. As you probably know, in order for a contract (like a noncompete agreement) to be enforceable, it has to be supported by adequate consideration (i.e., you give something to get something). Due to the nature of at-will employment, some states' courts have held that continued employment is not adequate consideration. So the question is not whether you can require your current staff to sign the document (you certainly can), but whether that document will be enforceable as to those employees.

I don't know what the law in Iowa is, but if it turns out that "sign this and we won't fire you" isn't good enough, you could always tie the signing of the document with some sort of (nontrivial) raise or bonus. That way there's something concrete that you're exchanging for the employee's promise to abide by the agreement.

If you end up going the noncompete route, the attorney who helps you with that process will be able to advise you how you can get your current employees to sign enforceable agreements.

Lisa In Iowa

Thanks, missk! I appreciate your comments! If we do decide to proceed with this, we will definitely do so with assistance from an attorney!