If you are interested in launching a business that will be a competitor for your former employer, be mindful of existing agreements with your former employer.
Businesses do not control their clients or customers. Clients and customers are free to choose with whom they do business. However, certain agreements executed between you and your former employer may prevent clients and customers from doing business with you.
- Nonsolicitation agreements. These prohibit employees from having any kind of contact with a client or customer -- even prospective clients and customers -- of the employer once employment ends. Many of these agreements prohibit employees from enticing other employees to leave at the same time.
- Noncompetition agreements. These prohibit employees from working in the same field or profession as their former occupation within a certain geographic area and time period. If the geographic area and time period are reasonable, the agreement will be upheld. Employees acknowledge by signing these agreements that they have the ability to earn a living in another career field upon the termination of employment. Noncompetition agreements in Tennessee are utilized and are enforceable in a variety of career fields, with the exception that doctors are no longer bound by them.
- Nondisclosure agreements. Also known as confidentiality agreements, these are contracts through which the employee agrees not to disclose confidential information gained through employment and training with the former employer.
Prior to signing any agreements with an employer, make sure you read and understand each document. Take the documents to your attorney for review if you have any questions. The agreements described above are rarely worth fighting in court. Agreements that are reasonable will generally be upheld.
With this in mind, consider these guidelines when leaving your employer to start your own business:
- If you’ve signed a noncompetition agreement, you cannot be employed in a job that violates the employment boundaries of the agreement. You are prohibited from competing against your former employer. For example, if you are an accountant or salesperson who specializes in very specific area, you cannot start a business that has the same specialization. However, you could start a business that is in a different field than your former employer.
- If you’ve signed a nonsolicitation agreement, you cannot communicate with clients and customers of your former employer for the purpose of gaining their business.
- If you’ve signed a nondisclosure agreement, you cannot use or disclose confidential information that is specific to your former employer.
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Leaving Another Company to Start Your Own