Turnover in today’s economy can be high since sales agents take their expertise to a new job for higher pay, leaving a merchant credit card processing business exposed to information poaching. So is it smart for merchant processing companies to consider a non-compete agreements?
Non-Compete vs. Non-Solicitation Agreement
Clauses for non-compete and non-solicitation are included in employment and agency agreements as part of the work contract signed at the beginning of employment. A no-compete clause restricts an employee or agent from engaging in specific activity within a certain geographic location and time period once an employee is terminated.
However, a non-solicitation clause restricts the employee or agent from contacting any merchants, customers or remaining employees that they met through the former employer within a certain geographic location and period of time.
Laws are governed by individual states, so there is no clear way to analyze or enforce agreements industry wide. Merchant lists, in particular, may constitute trade secrets, but it depends on the state and how the information was used by both parties.
Overall, general information learned to do the job effectively is not covered, but any covenants put in place to protect specific information are considered.
It’s important to know who you are hiring, especially if they formerly worked for a competitor. Be clear if they are still bound by a non-compete, or you could be held liable on a variety of counts, including theft. If you hire someone who solicits a former employer’s contacts while working for you, the former employee could file an injunction to keep that information blocked and seek monetary damages against you.
Even if you are successful in defending yourself, it costs time and money, making it in your best interest to incorporate inclusive clauses. For non-compete and non-solicitation clauses, it’s important to:
* Be clear on how long, where and how to restrict the employee from competitive activity after termination
* Discuss limitations with an attorney to factor in state law restrictions
* Make sure agreements are clear, well-drafted and set specific expectations for both sides