Can a noncompete protect your business from trade secret theft?

Glenn W. Peterson

The leaking or misuse of vital company secrets has the potential to harm your Sacramento business. If a former employee uses what he or she learned while in your employ to start a competing company, you might end up losing customers. This could also happen if he or she distributes protected company knowledge to others. For this reason, you might find it beneficial to have employees sign a noncompete clause.

Entrepreneur points out that noncompete agreements are, in part, used to prevent employees from creating unfair competition after they leave employment. In this way, they might entice away your established clients or compete in a geographical area that is too close to your business. How might a former employee hurt your operations with the theft of trade secrets? If, for example, you are the owner of a popular bakery, an employee who knows your secret recipe might use the recipe to start his or her own bake shop. An engineer who worked for your game development firm might use your company’s programming code or client information to develop a competing business. Either of those scenarios would take advantage of information that you would not want to be used outside the scope of your business.

A noncompete agreement could specify that employees are prohibited from using their knowledge of your company’s operations, clients, financial information or other data for their own gain after leaving your employment. Violating the terms of the agreement may give you legal recourse. This information, however, should not replace the advice of a lawyer.