Non Compete Agreement with another Company. Is it legally binding?

blobert

Hi Guys,

Quick question for you. Say if I outsource a lot of the work that my business does to another company.

I then fear that they will then just copy my business idea/execution and set up something similar themselves in competition to me, maybe even stopping doing the work they do for my company in an effort to hurt my business.

Is there a way to stop this happening?

Can I get them to sign an agreement prohibiting them from running the same type of business as me for the time that I work with them + x number of years afterwards?

How would I go about doing this and is it legally enforceable, ie what would happen if they broke the agreement and went ahead with setting up in competition?

Any advice would be much appreciated!

RATM

I'm not a legal expert and so my first bit of advice is that for something so complex and important to your business you should consult someone who is.

I am familiar with non-compete agreements in employees contracts though and as long as they are watertight legally then yes they are enforceable. So if any employee ( lets say the Head of Sales ) jumps ship to a another employer he may be in violation of the non-compete agreement, especially if the competitor is in the exact same industry and niche. Often employers don't enforce them unless there is bad blood or if the employee takes sensitive information / client contact details out of the company and uses them in the new company. If the employee is head hunted with the specific aim of using his knowledge to poach custumers from his previous company then there is very much a case to be heard.

The legal profession itself is very familiar with non-compete agreements- when solicitors take on apprentices their biggest fear is the apprentice will set up in the same town as soon as he is fully qualified and compete with the very person who taught him how to practically operate as a solicitor. Typically the apprentice will be much younger and therefore likely to uncut prices. So the solicitor will have a non-compete agreement written in stating he may only set up within X miles of his practice. Also for legal purposes it seems that he can be frozen out from setting up for up to 6 months but beyond that is seen as effecting his rights to earn an income.

The employee-employer relationship is different to what you're proposing with an outsourcing company but do bear in mind that almost anything can be contracted for provided it is within the law and doesn't inflict either parties rights. That is where you are going to need an experienced solicitor in that domain who can conceive of every single possibility that may occur and then contract for it and outline what should be the course of action taken by either party should the possibility arise.

blobert wrote: »

Hi Guys,

Quick question for you. Say if I outsource a lot of the work that my business does to another company.

I then fear that they will then just copy my business idea/execution and set up something similar themselves in competition to me, maybe even stopping doing the work they do for my company in an effort to hurt my business.

Is there a way to stop this happening?

Can I get them to sign an agreement prohibiting them from running the same type of business as me for the time that I work with them + x number of years afterwards?

How would I go about doing this and is it legally enforceable, ie what would happen if they broke the agreement and went ahead with setting up in competition?

Any advice would be much appreciated!