In the day-to-day grind of your business you spend so much time talking to customers, owners, and other contractors as well as managing the daily aspects of your business, you can quickly lose sight of how and where your business can be vulnerable. The more successful you are, the greater the target you become and the more likely you can become a victim of predatory practices.
In many small and medium-size businesses, the administrative area of the office can get quite messy. Paper is flying, orders are coming in, bills are coming in, payments are going out, not mention personnel, insurance, equipment, raw materials transactions etc. Sometimes, unfortunately, good document security practices fall victim to this clutter. The consequence can be that documents, spreadsheets, simple bookkeeping ledgers are frequently left in plain sight.
These documents contain vital financial and business records of your company. As such, they are “trade secrets.” You can protect this confidential information by implementing document safeguard revisions.
First, you need to be very aggressive about acquiring your staff to put away the sensitive information and documents.
Second, you should be very aggressive about labeling trade secret information as “confidential, proprietary company information” as this demonstrates that you were trying to protect the information contained.
Let us assume that you employ an ambitious sales manager who is very good at prospecting, estimating, and bringing in new business. This manager relies extensively upon details of your business including who your customers are, what work they have done in the past, and who they know. All of this falls under the umbrella of trade secrets, but only if you have taken steps to make it known this information is confidential information.
One day, your manager announces that he or she is leaving your company. ”Six weeks later you discover this enterprising former manager is now calling upon your customers soliciting work from them. To prevent this sort of business problem, put in place a non-compete agreement. These agreements state that after leaving, the former employee cannot compete against you in the same business, for a reasonable period of time, and in a reasonable geographic territory.
Similar to non-compete agreements, non-solicitation agreements prevent your former employee from calling upon your customers for a certain period of time and within a reasonable scope and geography, although these agreements may give you a little bit more flexibility. For example, if your former employee has gone to work for a company that provides a variety of services, including pouring concrete, you could use a no solicitation agreement to prevent the former employee from calling upon your customers to sell a product unrelated to what you do. The theory is that if the former employee is able to obtain business from your customer, that former employee may be able to cross sell concrete related services to your disadvantage.
No raiding provision
Now let us assume that you did not have any protective agreements in place and suddenly two of your three work crews announce their departure en masse. Lo and behold, they are going to work for your former employee. This not only means you are less capable of performing the work you already have, but you have to find new workers, train them, and bring your production quality up to the standards it had previously. Meanwhile, your new competitor is chuckling as he calls upon all of your customers explaining that you can no longer do their work. You could have prevented this with a no raiding provision by which an employee agrees not to contact coworkers regarding employment matters if the employee leaves your company. This helps preserve your workforce.
Remember that these agreements are a contract and that to be effective, there must be some consideration or value exchanged. For a new hire, the consideration is the agreement to employ the individual, but for someone who is already employed, if you are implementing a non-compete agreement you may need to give them something in return for their agreement. This could be as little as $20 or $50 depending upon the state you are in. Remember, all of these agreements are governed by state law, so it is very important to confirm that your agreement complies.
If you take the time to protect your trade secret information and use these protective covenants, you will safeguard the assets of your business.