The question of non-compete clauses for agency employees continues to draw blank stares from many agency principals. The truth is too many agency principals run their businesses without these critical employee agreements—almost as risky as buying a home without taking homeowner’s insurance. You wouldn’t do that, would you? All your life you’ve been taught to protect your assets. In the agency business, that’s just what agency employees, clients, and prospects are—your assets. The physical assets of most agencies are minimal… a few sticks of furniture, some computers, maybe a couple of cars. Even if you own your building, you may own it in partnership with your partner or your spouse, or personally, not under your corporation. If you believe that employees, clients and prospects are assets, then you should protect these assets just as surely as you protect your office building or your home.
Will the Courts Uphold it?
One debate we always get into during non-compete discussions is whether these contracts can be enforced. “Why force employees to sign and go through that hassle when the contracts can’t be made to stick?” one debater asked, after pointing out she even went to court over a non-compete clause and lost. It is true the courts frown on occupationally limiting contracts, but there are some things you CAN protect in court. When having employees sign non-competes, keep the occupational factors in mind, and write the contracts accordingly.
What you are attempting to do with a non-compete clause is protect your assets. You are not attempting to limit the person’s ability to make a living. They can start their own advertising agency, or go to work for your competitor. The only thing they cannot do is take your assets. The courts will generally uphold a non-piracy clause because there are countless other accounts, prospects, and employees on which this person can draw to ensure their income.
What About Current Employees?
Remember that non-piracy agreements must be entered into on a quid pro quo basis with current employees. You cannot lessen an employee’s position by insisting they sign an employment agreement as a condition of their continued employment, so if you don’t have non-piracy agreements with your current employees (especially key managers and creatives), you’re going to have to introduce the agreement at opportune moments like promotions, new benefits, raises, etc. At that time you can, as a part of your new offer, ask them to sign a non-piracy agreement in recognition of their newly increased importance to your agency. New employees are a different matter. You can immediately, as a condition of employment, ask them to sign a non-piracy agreement as they accept the position.
Get smart. Start protecting your assets. Have employees sign non-piracy agreements as soon as you can arrange it.
