Successful businesses must protect themselves from an employee today becoming a future competitor. Many business owners don’t believe this could happen to them. I used to think so too. However, once my consulting firm grew to over seven figures per year, several employees presumed it would be easy to start a company to compete against me. Although, a Non-Disclosure Agreement (NDA) does not prevent them from competing, it does deter them from taking any customer, intellectual and other private company information.
When I launched my management consulting firm, Actoras Consulting Group, Inc., to attract the best employee talent required I pay higher level entry salaries above the overall average. I used an experienced human resources expert to determine which pay scale would attract and retain the best talent.
Non-Compete vs Non-Disclosure Agreements
Concerned about losing intellectual property and proprietary information about my firm, I asked my attorneys the best solution to protect myself. They advised me that non-compete employment agreements could be difficult to enforce. Basically, it is difficult to prevent an employee from gaining future employment if they left my firm. They did recommend a non-disclosure agreement as part of my hiring process.
For each of my businesses, I issued an NDA policy during the hiring process. Every employee signed this agreement for job acceptance. This policy clearly stated, they could not discuss or use proprietary information which included: customer names, intellectual consulting materials and other business differentiators. Basically, they could not use, talk, or share any information about the company with anyone.
At Actoras, three key employees each left to create their own competing consulting business thinking they could make more money for themselves. My attorneys were able to enforce this agreement and prevent these employees from sharing this information. Furthermore, it prevented them from competing against me for specific clients, using information they learned as my employees.
- Create a non-disclosure agreement to be signed by all employees, including family members and friends that are employed in the business.
- Hire an experienced legal firm and human resources consultant to help with this process.