Answering 7 Questions About Non-Compete and Non-Disclosure Agreements

Non-compete and non-disclosure agreements are valuable business tools, but it’s important to understand the distinction between the two. Here are seven frequently asked questions that clarify how these agreements work and why they’re important.

Non-disclosure agreements (NDAs) and non-compete agreements, also called a non-competition agreement or covenant not to compete, have distinct purposes. Both documents, however, are restrictive covenants that limit what an employee can say or do, and (often) where they can and cannot work. These documents are designed to protect proprietary information and the company itself if an employee were to leave the company to work for a competitor.

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    Lately, NDAs and non-competes have been getting a bit of a bad reputation. A recent story in the New York Times argued these documents can “take a person’s greatest professional assets—years of hard work and earned skills—and turn them into a liability” for employees. The piece claims employers have come to assert ownership over their employees’ work experience as well as their work, and that noncompete agreements in particular can keep employees “stuck” at a company, because the employees fear they won’t be able to get another job.

    The truth is, non-compete agreements and non-disclosure agreements are valuable tools for business owners—not because they force people to stay with you, but because they offer legal protection over the work that makes your company different and special. Poorly drafted or unreasonable agreements probably will be deemed unenforceable, but a well-crafted NDA or non-compete should not be. These agreements will respect your right to keep proprietary information protected, and respect an employee’s decision to take his or her career in a different direction.


    Common NDA and non-compete agreement questions

    There are many reasons you might decide to require your employees to sign either an NDA or a non-compete. It is important to understand the differences between these two documents and how they are enforced. Listed below are seven common questions people ask about these agreements.


    Q: What is the purpose of a non-compete agreement?


    A: A non-compete is an agreement in which one party agrees not to compete against the other party. In an employer-employee context, this refers to an employee being the recipient of the prohibition on competition and an employer being the protected party, who is using the non-compete agreement to protect her specific business within a specified geographic area for a specified length of time. A non-compete typically restricts an employee from working for a competitor for the length of time and within the geographic area mentioned in the contract. The language of a non-compete is usually contained within the employment contract.


    Q: What is the purpose of a non-disclosure agreement?

    A: A non-disclosure agreement (also referred to as a confidentiality agreement) between an employer and an employee prohibits the employee from disclosing any of the employer’s proprietary information, business processes, intellectual property, or knowledge assets.


    Q: Are non-competes and NDAs enforceable in Ohio?


    A: NDAs are generally enforceable in Ohio, provided the confidential information to be protected is properly defined and constitutes the employer’s proprietary information. Non-competition agreements are enforceable in Ohio, provided they are “reasonable.” The Ohio Supreme Court has held that non-competition agreements are reasonable (and thus, enforceable) in Ohio, if the employer can show that:

    1) the restrictions are no greater than necessary to protect the employer’s legitimate business interests; 

    2) they do not impose an undue hardship on the employee; and 

    3) the restrictions would not injure the public.  

    There are several important factors the Ohio courts consider in deciding whether to enforce non-competes, including, but not limited to, the geographic area covered by the restriction, the duration of the of the non-compete, whether the employee possesses confidential information or trade secrets of the employer and the likelihood the employee can find other employment if the non-competition agreement is enforced.


    Q: Is it legal for an employer to require an existing employee to sign a non-compete and/or a NDA to keep their job?


    A: Employers generally may make signing a non-compete or a NDA a condition of employment or of continued employment. There might be exceptions for employees who are already covered by individual employment contracts or union agreements.


    Q: What is a reasonable length of time and a reasonable geographic scope for a non-compete agreement?


    A: Courts often consider factors such as geographic scope, length of time and the nature of the duties restricted in relationship to one another. A broad geographic scope might be enforced if the duration of the non-compete is as short as a month, but a broad geographic scope coupled with a long period of time is not likely to be enforced. A court generally will not enforce a non-compete that prevents an employee from working in a region where the employer is not doing business.


    Q: Is a non-compete or NDA valid after I fire an employee?


    A: It depends on the document. If the document addresses what happens after an employee is fired, then it might be valid.


    Q:  What are non-solicitation agreements?


    A: Another instrument that can be useful to employers who are looking to protect their business’ intellectual property is a non-solicitation agreement. Non-solicitation agreements restrict an employee from soliciting the employees or customers of a business. For example, a super-star sales manager who leaves your company would not be able to solicit other team members to leave with them, nor would they be able to poach your customers or clients if the departing employee signed a non-solicitation agreement.


    Why these documents are important

    A story in The Balance highlights the biggest challenge with non-competition, non-disclosure and non-solicitation agreements: enforcement. Once the trade secret has been divulged, the employee has been solicited to leave, or a former employee’s competition has ruined a business, it takes a lengthy, costly legal process to recover damages and put that proverbial genie back into the bottle. 

    The Columbus CEO discusses the vital importance of enforcement, quoting a study that revealed less than half of the organizations in the study said their organizations take action when workers take sensitive information. When an employee leaves your organization and starts a new job that potentially violates the agreements they have signed, you may choose to send a “cease-and-desist” demand to the former employee’s new employer informing them of your former employee’s non-competition agreement. 

    The intention of this blog post is to give you a rough outline of NDAs and non-competition agreements. Whether it is appropriate or necessary for you to use one or both agreements, and what details they should include, should be a topic of conversation with your business attorney.

    For more information on this topic, contact Alex Gertsburg at 440-571-7775 or ag@gertsburglaw.com. Get more legal tips for your business on The Gertsburg Law Firm blog, with new articles every week.

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  • Answering 8 Frequently Asked Questions About COSE’s MEWA

    To provide you with a more competitive set of healthcare coverage solutions for your company and your employees, COSE has partnered with Medical Mutual to offer the COSE Health and Wellness Trust, also known as the COSE MEWA. This is a multiple employer welfare arrangement (MEWA) designed as a self-funded benefit option for businesses with 50 or fewer employees. Business owners with no employees are eligible to apply.

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    Listed below are nine of the most frequent questions we receive from members about how the COSE MEWA works and how it may be a good benefit option for small businesses. Looking for additional insight? Visit our COSE MEWA information page.

    Question 1: What is the COSE Health and Wellness Trust?

    Answer: The COSE Health and Wellness Trust is a new way to cover your employees’ health benefits with some great financial benefits for you. It’s a self-funded, Multiple Employer Health Welfare Arrangement (MEWA) health plan for COSE members and designed with small business needs in mind. The COSE MEWA was exclusively developed by COSE and the Greater Cleveland Partnership to help its small business members and their employees with the increasing cost of healthcare benefits.

    Question 2: Who can apply?

    Answer: You must be a member of the Greater Cleveland Partnership’s Council of Smaller Enterprises (COSE) to apply for coverage in the COSE MEWA, and your business must have 50 or fewer employees. Business owners and partnerships with no employees are also eligible to apply. Please contact your broker or our direct sales team at (888)310-6262 or COSEbenefits@medmutual.com.

    Question 3: What are the benefits of using the COSE MEWA for my group’s health coverage?

    Answer: The COSE MEWA was designed to manage your healthcare benefits cost, and provide benefit plans that may be a better fit for small business owners and their employees. Because the COSE MEWA is a self-funded plan, it has many benefits, including:

    • The COSE MEWA offers 18 different plan options with varying deductibles and coinsurance designed exclusively for the COSE MEWA, and because MEWAs are not subject to some of the Affordable Care Act’s (ACA) mandated benefits and taxes, it helps to keep costs lower.

    • The cost of your benefits better reflect the unique health of you and your employees, recognizing that a healthier team should create a better benefits cost outcome.

    • All COSE MEWA benefit options are tied to the same Medical Mutual network of doctors and hospitals that COSE members have accessed for years.

    • And, because we have arranged to have Medical Mutual administer these benefits, your employees will still have access to Medical Mutual’s Customer Care team.

    • In addition, we know that the security of your data and information is important. So, as an additional benefit, the COSE MEWA also offers identity theft resolution services coverage and remediation services at no additional cost.

    Question 4: What are the advantages of a self-funded plan?

    Answer: There are several advantages to small business owners with a self-funded option:

    • The COSE MEWA offers rate stability, the flexibility of benefit options and recognition of preferred health status.

    • The COSE MEWA may be less expensive for your group than similar ACA plans because it considers criteria unique to your employees such as medical history.

    • Your disclosed pre-existing conditions will still be covered.

    Question 5: How will my group funding rates be determined?

    Answer: Unlike Community rated ACA rates that are solely determined by age, location, family size and smoker status, your group rates will be based on additional factors, such as medical history and gender. The expanded criteria of the COSE MEWA for pricing your benefits allow us to tailor the costs to the unique characteristics of your group, recognizing the preferred health status that you may have.

    Question 6: How is the COSE MEWA regulated and protected?

    Answer: The COSE MEWA is regulated by the Ohio Department of Insurance (ODI). These state regulators monitor the COSE MEWA to ensure appropriate surplus is available to cover unforeseen risk and protect its solvency. The COSE MEWA also maintains stop-loss insurance coverage to provide additional protection to plan participants. You can feel confident about the stability of the COSE MEWA as it is closely monitored by the Internal Revenue Service, the Department of Labor and the ODI.

    Question 7: Do these plans comply with the ACA?

    Answer: These plans comply with all ACA mandates applicable to self-funded plans as well as certain state requirements for MEWAs. The COSE MEWA covers ACA-compliant Essential Health Benefits with the exception of pediatric dental coverage.

    Question 8: Who can I contact for more information about plans or to get a quote?

    Answer: For more information or to get a quote, please contact your broker or contact the Medical Mutual COSE Benefits team at (440) 878-5930 or call (888)310-6262. You can also email questions to COSEbenefits@medmutual.com.

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  • Avoid becoming another Fire-Loss Statistic

    Losses as a result of fire damage put a big dent into business operations every year. U.S. fires resulted in an estimated $11.6 billion in direct property loss during 2014, according to the National Fire Protection Association. On average, a civilian fire death occurred somewhere in the country every two hours and 41 minutes. There are a number of steps businesses can take to avoid becoming another fire-loss statistic, according to the Ohio Department of Commerce. These steps are centered around four main themes.

    Losses as a result of fire damage put a big dent into business operations every year.

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    U.S. fires resulted in an estimated $11.6 billion in direct property loss during 2014, according to the National Fire Protection Association. On average, a civilian fire death occurred somewhere in the country every two hours and 41 minutes.

    There are a number of steps businesses can take to avoid becoming another fire-loss statistic, according to the Ohio Department of Commerce. These steps are centered around four main themes

    Create a fire safety plan

    It’s important that businesses have in place a fire safety plan that is reviewed annually. This plan will help employees identify actions that need to be taken to help prevent a fire. This plan should include:

    • designating an outdoor central meeting place that is well-marked;
    • establishing a process by which employees who are trained to use fire extinguishers are trained annually; and
    • acquainting the local fire department with your facility, its location and potential specific hazards.

    Housekeeping

    Keeping a tidy workplace environment can also help support the fire protection cause. Employees and employers should:

    • keep personal workspaces clean;
    • check heating units at least annually;
    • empty waste containers daily;
    • turn off non-essential electrical equipment at the end of each day;
    • ensure extension cords are the correct size and used for portable equipment only; and
    • check electrical outlets regularly to ensure they are not overloaded.

    Storage

    Workplace materials must be stored safely. This can be accomplished by:

    • keeping combustible materials at least 3 feet away from heat sources;
    • disposing hazardous materials properly; and
    • maintaining at least 24 inches between the top of a stack of materials and the ceiling.

    Fire Protection

    If fire does occur, it’s important to be prepared. Some fire protection tips include:

    • clearly marking all exit doors and removing any potential obstructions from the door;
    • allowing exit doors to be opened from the direction of exit traffic without the use of a key or any special knowledge or effort;
    • mounting fire extinguishers in accessible and identified locations;
    • keeping a space of at least 18 inches below sprinkler heads and checking the sprinklers annually;
    • testing emergency lighting every month; and 
    • keeping doors closed when rooms are not occupied (closed doors can act as a barrier to smoke and fire).

    Escape tips

    In addition, it’s important to keep in mind what should be done to escape a fire:

    1. If you see smoke, try another way to escape. If you have to escape through smoke, stay close to the floor.
    2. Check doorknobs and the space between the door and frame with the back of your hand before opening closed doors. If it is cool, open the door slowly but be ready to quickly close the door if smoke comes through.
    3. Elevators should not be used during a fire.
    4. Once you're out, STAY OUT. If someone else is trapped inside, tell the Fire Department. Fire gasses in the building are toxic and can kill.

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  • Tips for Your Business: Be Disaster Ready

    July 8th was an anxious day for some and a fearful one for others. During the course of a four-hour span, three well-known institutions – United Airlines, the New York Stock Exchange and The Wall Street Journal – were suddenly offline, leaving their customers, partners and the global market fretting over a possible larger-scale issue. While each of these organizations continue to consider the effect of these outages and what could have been done to prevent it, all businesses can learn a valuable lesson from this calamity. Ask yourself: Are you prepared for a disruption to your business?

    July 8th was an anxious day for some and a fearful one for others. During the course of a four-hour span, three well-known institutions – United Airlines, the New York Stock Exchange and The Wall Street Journal – were suddenly offline, leaving their customers, partners and the global market fretting over a possible larger-scale issue.

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    While each of these organizations continue to consider the effect of these outages and what could have been done to prevent it, all businesses can learn a valuable lesson from this calamity. Ask yourself: Are you prepared for a disruption to your business?

    The ever-increasing reliance on technology has brought business continuity and disaster recovery to the forefront of many businesses, presenting a challenge to IT and business leaders as to how to create an effective disaster recovery (DR) plan. 

    The first step in creating a DR plan is identifying and understanding the types of common disaster events that can affect your business, including:

    • Environmental – tornado, hurricane, snowstorm, flood, and fire.
    • Deliberate – terrorism, sabotage, theft, arson (internal personnel or external).
    • System Failure – hacker, employee destruction.
    • Other Emergency Situation – public transportation, governmental, legal.

    Once these events have been classified, establishing a DR checklist is the next step. Below is a standard outline of a checklist:

    • Justification – Define the Executive Sponsors. Executive Sponsors are the business leaders within your organization responsible for creating a DR plan.  Business leaders must determine the timeframe for recovery (how long can the business be unavailable), as well as establish a budget to support the initiative. In general, this phase begins the process of establishing a business impact analysis, which is a risk assessment of the impact to your business should a disaster occur.
    • Inventory – Document your entire IT environment (applications, network elements, access points, data, etc.).  You will also need to understand how the applications and data are being accessed and used by employees, partners and customers. 
    • Prioritization – Prioritize applications in tiers, from the most to least critical.
    • Budgeting – Forecast the initial setup fees (capital expense) as well as the operating cost of managing a disaster recovery plan. Operating costs include training, testing, fees to host the DR environment and the applicable software licensing fees.
    • DR Planning – Formalize an action plan in the event a disaster impacts your business. Elements of this plan should include an appropriate alternative location to operate from (technology platform and people), processes and procedures for declaring a disaster, and individual and/or team-based responsibilities in the event a disaster is declared.
    • Maintenance – Be diligent in revising the plan as technology and your business evolve and change. Test your DR plan annually and review the outcomes to understand what gaps occurred and what risks can be mitigated, and update the plan accordingly.

    Once the dust settled from the outages of July 8th and the cause of each disruption surfaced, the concern of a terrorist cyber-attack was diminished. It was revealed United Airlines suffered a network outage that caused the carrier to ground flights by more than an hour, the NYSE’s online trading platform crashed due to a misguided software update and WSJ.com was overwhelmed by traffic due to investors and the market seeking information as to why the NYSE trading environment was offline.  

    Even a small scale disaster can impact business on many levels. In the event of a disaster or disruption to your business, do you have a plan in place to continue your day-to-day operations? 

    David Saliba is vice president of Expedient, a leading provider of cloud computing, managed services and colocation in Cleveland.

    This article originally appeared in the August 3, 2015, edition of Small Business Matters.


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  • "Best Benefits Decision I Ever Made…"

    “Joining COSE’s group-rated Workers’ Comp Program has helped me in my business in so many ways. Not only has COSE saved me money on premiums, but they understand my needs and can fight for me better than any other program. I’m not just another number among many other businesses to them. They provide individualized attention and navigate my problems for me, leaving me to continue focusing on what I’m passionate about – my restaurants.”  - Eric Williams, owner, Momocho and El Carnicero, and partner, Happy Dog and Jack Flaps

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    “Joining COSE’s group-rated Workers’ Comp Program has helped me in my business in so many ways. Not only has COSE saved me money on premiums, but they understand my needs and can fight for me better than any other program. I’m not just another number among many other businesses to them. They provide individualized attention and navigate my problems for me, leaving me to continue focusing on what I’m passionate about – my restaurants.”

     - Eric Williams, owner, Momocho and El Carnicero, and partner, Happy Dog and Jack Flaps

    With his passion for good food and his desire to support his hometown and the local economy, Eric Williams has independently opened or partnered in some of Cleveland’s hottest restaurants in the last few years. He has encountered a few bumps along the way, with new and different challenges for each new operation, and relied on COSE’s workers’ comp team to help him navigate the obstacles.

    Get a free quote on COSE’s group-rated Workers’ Compensation Program.

    This article originally appeared in the March 23, 2015, edition of Small Business Matters.



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  • COSE WebEd Series: Building A Better Workplace with Policies & Procedures

    Learn how to build a better workplace in this webinar presented by Elizabeth A. Crosby from Buckley King.


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