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Employment Agreements: Is Your Business Protected From Your Employees Stealing Your Clients, Competing with You, or Disclosing Your Trade-secrets ?

Headnote: legal agreements, employment agreement, non-competition, non-solicitation, contracts, Ontario

by: Peter Cusimano, B.Sc., LL.B.

Who Should Read This

This article is intended for real estate agents, insurance agents, architects, engineers, advertising agencies, accountants, dentists, computer software companies, manufacturers, and any business that is at risk from former employees stealing clients, competing with you, or disclosing trade-secrets or confidential business information to others. This article discusses how a written employment agreement can work for your business and potentially save you money, aggravation, disappointment, and business failure.

Is Your Business at Risk ?

If you have no written employment contract with your employees but rather maintain an oral employment relationship or in other words an employment relationship based only on a handshake then your business is at great risk. If your business is dependent on a loyal customer base and if you do not adequately protect yourself, your former employees may begin soliciting your hard-earned customers, may open a competing business across the street from you, or may copy your customer list, your trade-secrets and techniques. Unless you have a written employment contract in place that deals with these concerns it will be very difficult and very expensive to stop the other party or obtain legal relief from them no matter how “right” you think you are and no matter how much you think the other party is a “thief”.

Who Can Steal From You

Anyone in your business who has access to information about your business can “steal” company information from you. Not only does this include those who created the information but also includes those who may have access to the information including your employees, secretaries, cleaning staff, students, outside consultants, and former employees. If your business uses computers, your entire company including customer lists and information, inventory lists, financial reports, supplier lists and whatever else may be on your computers can be copied to a diskette and “stolen” from you without you even knowing about it until it is too late.

How To Protect Your Business

If you are going to hire a new employee, a written employment agreement should be used to help protect your business. The use of non-competition, non-solicitation, and confidentiality clauses in employment agreements can save you money, time, aggravation, and most importantly your business. If you need to take legal action against a former employee, a written employment contract will greatly favour your position. Although some employers believe that asking an employee to sign a written employment agreement will spoil the relationship, smart employers know that a good employment agreement helps to protect their business and all parties will feel more comfortable knowing that their respective duties, obligations and benefits are in writing. The agreement will be tailored to the specific requirements of your business and will be written in plain English. Among other terms, the agreement will deal with the following:

  • Term of employment
  • Pay and any benefits such as vacation or health plan
  • Duties of the employee
  • Representations by the employee such as academic qualifications
  • Termination of the employee for cause if certain events occur
  • Termination of the employee without cause if certain events occur
  • Confidentiality of information
  • Non-competition during and after employment with your company
  • Non-solicitation of your customers/clients and employees
  • Ownership of any customer lists & records, copyrights, patents (if any)
  • Office procedures and policies

If you have an existing employee that you now wish to be subject to a written employment contract with the above clauses, careful analysis by a lawyer of your particular situation is required before any advice can be provided.

How the Law Office of Peter Cusimano Can Help Your Business

I will meet with you and evaluate the needs of your business. I will prepare the necessary employment agreement and will ensure that the agreement contains whatever is required to help protect any specific interest of your business. You will find that my agreements are complete, and understandable. Complete and clearer agreements are harder rather than easier to do. If something is not clear to you, I will explain it to you.

Peter Cusimano practices business law in Toronto, Ontario.