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Protecting Your Key Business Assets Takes More than Just a Non-Compete

It's not only what your business knows, but also who at your business knows it. Industry leading companies echo that key employees, who typically possess institutional knowledge and trade secrets, are their most valuable assets. Particularly for sales focused organizations, the risk of disloyal key employees taking know-how and relationships can be catastrophic. Protecting your key business assets is vital.

There are ways to protect your organization against risks associated with disloyal employees and raiding competitors. Effective planning and protection mechanisms can deter and effectively prevent disloyal employees from taking your hard earned institutional knowledge and property to work for a more-than-eager competitor, and may effectively deter key employees from leaving in the first place. Lack of effective planning, on the other hand, paves the way for "mutiny" and cannibalizing your business of other employees, information and customers.

How Good is Your Non-Compete?

Employees are often required to sign restrictive covenant, or "non-competes," that may contain prohibitions against competing against the employer, taking the employer's confidential information, and/or soliciting the employer's other employees and customers. Many employers collect boiler-plate non-competes from every employee, without giving further thought to when they are enforceable and what business practices may maximize the enforceability of non-competes. Employers generally expect such agreements to, without much more, protect the employer's ideas, customers and other employees. Although Michigan has a statute governing non-competes, MCL 455.774a , enforcing non-competes isn't as easy as one would expect.

But, That's Not Fair

"Reasonable" agreements that protect an employer's "legitimate business interests" are enforceable in Michigan and in many other states, with some variation. The definition of reasonable varies, however, as does the interpretation of legitimate business interests. To further complicate things, in determining whether to enforce a restrictive covenant, courts apply principles of equity - asking "is it fair...?" As any child can tell you, arguing and proving what is "fair" is easier said than done. While advanced planning and appropriate business practices can help establish "reasonable," "legitimate" and "fair," few employers take the advanced steps necessary to maximize the protections theoretically offered. Without appropriate advanced planning, many employers risk being taught a lesson in non-competes by a skilled litigator after-the-fact.

Don't Wing it, Get Professional Help

As an experienced litigator in the field, I make my living both enforcing and circumventing non-competes and other restrictive covenants. I also help clients assess non-competes and employer practices before it becomes too-late. While I have successfuly won such disputes at trial, and could help you on either side of the divide, I counsel my clients that an ounce of prevention is worth a pound of cure.

How confident are you that your key business assets are protected?

Alex Stotland is a business litigation attorney licensed in both Michigan and New York, who is a partner at Hertz Schram, with a significant practice in counseling and representing clients in disputes concerning restrictive covenants, trade secrets, raiding, unfair competition, licensing, and other business and employment issues. Alex can be reached at [email protected] or (248)335-5000.

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