On entrenched employees, exasperated employers, and restricting re-employment: part 3.

If you're an employer who wants to use non-compete clauses effectively:

This post is for you.

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In the previous part,¹ I addressed misconceptions that some employers may have about non-compete clauses.

So, having heard all this bad news...

...how can employers use non-compete clauses effectively?

Some practical suggestions below.

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First: get legal advice.

(I'm biased, I know!)

But seriously.

I'm engaging a professional if...

a) I'm installing a new air-conditioning system: I'm not an air-conditioning technician;
b) my car breaks down: I'm not a mechanic; and
c) I want to develop an app: I'm not a coder.

So why should a non-compete clause - a contractual term that lawyers and/or the Court may end up interpreting - be any different?

And do you really think an LLM-generated "non-compete clause" can be a proper substitute for legal advice?

Second: accept that there is no one-size-fits-all approach.

Where 2 different employees are subject to the exact same non-compete clause, the non-compete clause may be enforceable against one of them, but not the other.²

So if you're thinking of getting a lawyer to draft a "standard" non-compete clause, which you'll insert into all of your employees' contracts...

...sorry, that's not going to fly.

You're going to end up with a clause that is (a) unenforceable; (b) unevenly enforceable; or (c) provides so little protection that it's practically useless.

So be mentally prepared: this exercise needs to be bespoke to the key employees for whom a non-compete clause is necessary to protect the company's legitimate interests.

Third: do a cost-benefit analysis.

Now, I know costs are always a concern.

But let's take a hypothetical. Suppose your company:
a) is in the business of money-broking;
b) employs a leading broker who has good relations with key clients, and whose team generates 80% of the company's annual 8-digit revenues; and
c) runs the risk of this leading broker joining a rival firm and bringing all of your company's clients with him.³

In this situation, is a 4- or 5-digit legal fee really too much to pay to put in place a reasonable and enforceable non-compete clause that sufficiently protects the company's interests?

And I'm certainly not suggesting that every employee in the company should be subject to a non-compete clause. I mean, is there really a point in tying down a dispatch clerk or pantry attendant with such clauses?

But I do think it is worth:
a) identifying the employees who would cause the company to suffer greatly if they join a rival;
b) considering the value of an enforceable non-compete clause which applies to them; and
c) considering whether the cost of obtaining such legal advice is less than the value derived.

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In part 4, I'll conclude this series with some big-picture thoughts.