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What About Your Previous Company Non-Compete?

By: Dave Berkus


What About Your Previous Company Non Compete

Entrepreneurs tend to remain in the business niche they know best. Usually that means they once or recently spent time as an employee or manager within a company where they had little or no ownership.

Are you one of those?

Some of these entrepreneurs starting a new company are alumni from companies that would be a competitor to the enterprise being created or joined. And some are former selling shareholders of just those businesses.

Rules about non-compete agreements

So, what are the rules about those pesky non-compete agreements signed upon your discharge, or upon the sale of your previous company?

The good news is that if you were not a significant (usually 5% or more) selling shareholder of a previous company, most states specifically exempt non-compete agreements signed between companies and their employees or minority shareholders. In that case, you must worry only about information and trade secrets taken from the previous company which are both certainly subject to protection by almost all laws and courts.

The obvious admonition

So, to you and to everyone: do not take customer lists, design documents or any document considered a trade secret from any previous employer or previous consulting customer. Digital or analog!

Yes, some companies were sloppy and did not have you sign a confidentiality agreement, but that procedural slip-up does not protect you from their legal wrath. Further, there is no expiration date on these poisoned documents. You cannot complain that the document or information in question is more than five years or two employers old.

It makes good sense not to be in a position to be accused, let alone guilty of taking gray or bright red “borrowed” digital files or documents from a previous employer. We all have enough worries in our business lives not to be threatened by an emotional, upset previous employer.

Published: February 22, 2019

Source: Berkonomics

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Dave Berkus

Dave Berkus is a noted speaker, author and early stage private equity investor. He is acknowledged as one of the most active angel investors in the country, having made and actively participated in over 87 technology investments during the past decade. He currently manages two angel VC funds (Berkus Technology Ventures, LLC and Kodiak Ventures, L.P.) Dave is past Chairman of the Tech Coast Angels, one of the largest angel networks in the United States. Dave is author of “Basic Berkonomics,” “Berkonomics,” “Advanced Berkonomics,” “Extending the Runway,” and the Small Business Success Collection. Find out more at Berkus.com or contact Dave at dberkus@berkus.com

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