Archive for December, 2010

Non-Compete Agreements with Employees

Wednesday, December 15th, 2010

When employees leave your business, they take with them all the know how you gave them. They can go to work for your competitor or start a competing business. The same is true for the former owner of your business. This exodus of information can cause your business significant harm. You can protect yourself from this type of unfair competition by requiring that your employees and former owners enter into non-compete agreements with you.

A non-compete agreement is a contract in which a person agrees not to engage in a designated type of business for a certain length of time within a defined geographic area. In Colorado, all non-compete agreements are invalid unless they fall within one of several categories, and are reasonable in their duration and geographic scope.

Non-compete agreements can be used to prevent your executives, management and professional staff from leaving and going into competition with your business. However, a non-compete agreement cannot be used to stop other types of employees from going to work for your competitors.

A non-compete agreement that is part of a contract to buy a business can be used to stop a former owner of your business from competing with you. Such an agreement is valid if it is necessary to preserve the good will and value of the business. The right to enforce such an agreement, however, ends when the purchased business is terminated or abandoned.

Nondisclosure and confidentiality agreements can be used to protect your business= trade secrets from falling to the hands of your competitor. (A trade secret is any information relating to your business that is secret and of value that is not known by competitors or is not readily ascertainable elsewhere.) These agreements must be narrowly tailored to protect only the trade secret information acquired by an employee or former owner during their course of employment. They cannot be used to protect general knowledge of your business operations.

Non-compete agreements can play an important role in protecting a business from unfair competition and help retain key employees. However, to make sure you have an agreement that will be enforced when you need it, be sure that your non-compete agreements are drafted by someone knowledgeable and experienced in this area.

The Author, Jay E. Fernandez is an attorney and shareholder of the Fernandez Law Firm, PC. The Fernandez Law Firm is an established full service law firm offering high quality cost effective legal services to Colorado’s businesses, professionals, and individuals.
728 Coffman Street, Longmont, CO 80501. Telephone: 303.772.8900.

http://fernandezlaw.biz

DISCLAIMER: The above article is intended for informational purposes only, is not intended to be legal advice, and does not create an attorney-client relationship with the reader.

Protection of Trade Secrets

Friday, December 10th, 2010

Your company owns certain confidential information and intellectual property that gives it a competitive edge in the market place. This information can include customer lists, marketing methods, business models, pricing structures, contracts in place, manuals, procedures, and technical know-how. While some of these can be protected by copyright and patent law, many cannot. However, a Colorado employer can protect it’s confidential and proprietary information through the use of Colorado’s Colorado Uniform Trade Secrets Act .

Colorado courts determine whether certain business information can be considered to be a protectable trade secret. An employer will not know whether the information it seeks to protect will be legally regarded as a trade secret until the matter is tried in a court. Not all information an employer asserts is a trade secret will be accepted by the courts as a protectable trade secret. Information that is common knowledge or easily accessible within an industry cannot be protected, nor are the experience, skills, or abilities an employee brings to, or acquires on, the job.

In order for confidential and proprietary business information to be protected from disclosure or unauthorized use under the information must be:
(1) Secret;
(2) Of value because it is secret; and
(3) The employer must have taken reasonable steps to keep the information confidential.
(4) The extent to which the information is known outside the business;
(5) The extent to which it is known to those inside the business;
(6) The precautions taken by the holder of the trade secret to guard the secrecy of the information, such as keeping information in locked files, marking it “confidential,” and restricting access to the information to those individuals in the organization who need the information to perform their duties;
(7) The saving effected and the value to the holder in having the information as against competitors;
(8) The amount of effort or money expended in obtaining and developing the information; and
(9) The amount of time and expense it would take for others to acquire and duplicate the information.

Colorado courts have been divided on what types of information may constitute a trade secret. Some courts have held that a) lists of customers a former employee actually contacted while employed, b) marketing strategies, c) research and development information, d) candidates for job placement by a job placement agency, and e) a policy manual for a franchise were trade secrets. Other courts have held that a) a company’s pricing and bidding structure for commercial services, b) customers not actually contacted by an employee during employment, and c) customer lists, price lists, and product formulas, for which no steps had been taken to maintain their secrecy, were not trade secrets.

The Author, Jay E. Fernandez is an attorney and shareholder of the Fernandez Law Firm, PC. The Fernandez Law Firm is an established full service law firm offering high quality cost effective legal services to Colorado’s businesses, professionals, and individuals. 728 Coffman Street, Longmont, CO 80501. Telephone: 303.772.8900.

http://fernandezlaw.biz

DISCLAIMER: The above article is intended for informational purposes only, is not intended to be legal advice, and does not create an attorney-client relationship with the reader.