When Do You Need Non-Compete Agreements?

Your company has many valuable property interests that you can't see, feel, smell, or taste, such as your customer lists, trade secrets, and upcoming product launches. The best way to protect these and other interests from being used by employees after they leave your company is to have them sign a non-compete agreement (sometimes referred to as a covenant not to compete). Before you begin, you have to know what interests can be protected, where you're going to protect them, and how to enforce the agreement. For this article I interviewed Nicholas Fortuna, an attorney and principal in the NYC law firm of Allyn Fortuna who litigates employment-related matters.

What Are Non-Compete Agreements?

These are contracts between an employee and the company that bars the employee after leaving employment from working for a competitor, and/or using protected company information on a new job, or setting up a competing business. Most states will enforce non-compete agreements that are not overly broad. California and a couple of other states will not, viewing all non-compete agreements for employees as void.

What interests can be protected?

The reason why you want to prevent employees from certain actions after they leave your company is to keep them from actions that could undermine or destroy your business. Whether and to what extent you can keep a former employee from working with a competitor, starting a competing business, or using your business information to his or her advantage depends on the facts and circumstances. For example, if a factory worker leaves your employment to work for your competitor, there's probably no risk to you and no need for a non-compete agreement in this case. But if your company is in fashion design, you'd likely want to restrict the post-employment actions of your head designer.

Some interests that you can try to protect:

* Customers. If key sales personnel go to work for competitors, you don't want them to solicit business from your existing customers or clients.

* Trade secrets. How you do things in your business, including pricing, is something you don't want to share with competitors.

* Confidential information, such as an upcoming marketing campaign to launch a new product or service.

What is the extent of protection that can be obtained?

The scope of protection you can obtain depends upon what you're trying to protect. Usually, you can't prevent an employee from going to work for a competitor for more than a year or so. You probably can bar an employee from directly approaching your current customers and clients for a longer period. And you may be able to bar disclosure of confidential information indefinitely.

The key to creating an enforceable non-compete agreement is clearly defining the interests you're trying to protect and the reasons for doing so. The more specific you can be, the more likely your interests can be protected. The clearer your non-compete agreement, the better chances you have that a court will uphold it in case of litigation.

If your business operates in more than one state and you have employees in more than one state, make sure your agreement addresses the issue of which state's law will be used to enforce the agreement.

Are there special considerations for sellers?

When a small business owner sells the company, he/she may be required to sign a non-compete agreement. Such an agreement made in conjunction with the sale of a business can be broader than one for employees. For the most part, courts have a more liberal enforcement policy in this case because the owner is transferring goodwill to the new owner and any breach of a non-compete agreement would compromise or undermine the interests of the new owner.


Don't assume that a template for a non-compete agreement will provide you with the protection your business needs. Spend the money upfront to have an attorney who specializes in this area of law prepare an agreement that will protect your interests and be upheld in case of litigation. For example, a good lawyer will make sure you have a "tolling provision" in your agreement so that if an employee with a one-year ban violates the agreement, the period of time that the employee is in violation can be added to the ban (even if it takes longer than one year to resolve the matter in your favor).

The Cost of Bias - Below are a couple of Friedman's most compelling arguments:

From the guy who said "There ain't no such thing as a free lunch" – Milton Freedman on Equal Pay for Equal Work....

"Over and over we have to look at the actual consequences of policies, not the names of them. The immediate occasion that we're talking about now..."equal pay for equal work," is a claim for people supposedly for the feminist cause. Now I believe that's an anti-feminist slogan. It will hurt the feminists. It will not help them. Why? I believe that every individual man, woman, or child should have an opportunity to get a job if he wants to and can do it. But now, if there are some people who are prejudiced — if Mr. Jones is a male chauvinist — and he would prefer to have a man rather than a woman; or a Mr. Smith is a believer in feminine rights, and would prefer to have a woman rather than a man, it doesn't matter. But take the male chauvinist pig: If you have a law that he must pay the woman and the man the same, and if he can find some way around having to hire the woman, he gets away free. He doesn't have to pay for his prejudice. On the other hand, suppose he has the prejudice, but we let people compete. Then the woman at least has the weapon of offering to work for less. And he has to pay for his prejudice. The free market, by enabling people to compete openly, is the most effective device that has ever been invented for making people pay for their prejudices, and thus for making it costly for them to exercise it. And what you do when you impose the equal pay for equal work law, is that you make the expression of prejudice costless. And as a result you harm the people you intend to help."

EPA: Enough is Enough

 The Obama administration's EPA has launched a war against the coal industry, releasing a plan to implement New Source Performance Standards (NSPS), that would force coal-fired power plants to reduce carbon emissions by unattainable amounts with currently commercially available technology. This plan would create far-reaching regulations and would cripple the coal industry.

Technology has rapidly evolved over the last two decades, allowing for much cleaner and more efficient methods of energy production from coal. Power companies have already spent tens of millions of dollars on upgrading existing coal-fired facilities in order to meet current standards, resulting in dramatic pollution reductions.

Read more: EPA: Enough is Enough

Careful What You Ask For

Until Cliven Bundy shot himself in the foot with his racist diatribe, he was helping to rekindle the Sagebrush Rebellion of the 1970s. Mr. Bundy grazed his cattle on Bureau of Land Management land in Nevada and refused to pay over $1 million in grazing fees and fines because he claims the federal government has no right to the land.

Jumping on the Bundy bandwagon, many state legislators are trying to build support for the passage of laws similar to Utah's Transfer of Public Lands Act. The law, signed by Governor Gary Herbert in 2012, calls on the federal government to turn over thousands of acres of commodity producing lands to the state.

Lawmakers from eight western states joined forces on April 18 in Salt Lake at a summit to declare "enough is enough" when it comes to the mismanagement of federal lands in their states. One of the summit organizers, Montana Sen. Jennifer Fielder, said, "There is a distinct difference in the way federal agencies are managing the federal lands today. They used to do a good job, but they are hamstrung now with conflicting policies, politicized science, and an extreme financial crisis at the national level. It makes it impossible for these federal agencies to manage the lands responsibly anymore."

Almost no one with an interest in federal land management can disagree with Fielder's conclusion—even the land managers themselves. As Jack Ward Thomas, former chief of the Forest Service, put it, federal land management is tied in a "Gordian knot" of laws and litigation.

When the first Sagebrush Rebels made the same point, most thought the movement was about privatizing the federal estate. But neither ranchers nor environmentalists want the government out of land management. They just want the locus of management to be where they think they can more easily get what they want. Both sides should be careful what they ask for.

Today's Sagebrush Rebels want federal lands transferred to the states. But if they succeed, grazing fees would likely increase. In Montana, BLM grazing fees are $1.35 per AUM (animal unit month—the amount of land necessary to support a cow-calf pair for one month), while the state land fees are between $6.12 and $80. Moreover, if managed under state trust land requirements, the land would have to turn a profit. In fiscal year 2004, the year for which we have the best estimates, the BLM lost over $55 million dollars on its grazing programs, and the Forest Service lost another $60 million. Admittedly, this is as much due to high management costs as it is to modest revenues, so turning a profit would require adjustments on both sides of the ledger. Are ranchers ready to have less taxpayer money spent on their grazing lands and to pay more for their permits?

Environmentalists, on the other hand, want more control in Washington D.C., where urban constituencies can have a say in land management decisions. When President Clinton occupied the White House, environmentalists carried signs calling for "No Moo in '92" and "Cattle Free in '93." Their political pressure helped reduced grazing on federal lands from 8.3 million AUMs in 1991 and to 7.9 million in 2013. At the same time, however, grazing fees plummeted from about $2.00 per AUM to $1.35, the minimum that can be charged, where they remain today.

But "no moo" may mean fewer tweets, clucks, and bugles from wildlife. As private ranchers demonstrate, good land management can control noxious weeds, improve water quality, sequester more carbon, and generate more wildlife habitat. Ecologist and rangeland specialist Dan Daggett has documented hundreds of cases where cattle grazing has improved the ecosystem.

At a time when federal deficits are running at their highest levels ever and when guns are literally drawn over public land management, perhaps it is time for a real land management rebellion. It is time to consider privatization rather than more politicization of federal lands. We could start by selling off millions of acres of grazing lands. Private ranchers have proven that they are good stewards of the land they own, both in terms of livestock production and ecosystem services. If environmental groups want to have authority in land management, they should also accept responsibility by buying lands, as groups such as the Grand Canyon Trust and the American Prairie Reserve already do. Perhaps a little experimentation of this sort would provide further evidence that fiscal responsibility and environmental responsibility go hand-in-hand.

Terry L. Anderson is the president of PERC (the Property and Environment Research Center) in Bozeman, Mont., and a senior fellow at the Hoover Institution.

Taxes After Death

Along with death and taxes, add a third certainty in life: taxes after death.

On this April 15, and every other day, the IRS is seizing millions of dollars of alleged Social Security overpayments from children of dead beneficiaries.

The Treasury Department has been exercising its new authority since 2011, bringing in $424 million in old debts previously considered out of reach.

If the debtor is deceased, the Federal Trade Commission long has considered the money a write-off. But the Social Security Administration has a different view, chasing down adults whose parents cared for them with unintentionally overpaid benefits.

Read more: Taxes After Death

Could New Regs Lead to Needing Permits to Farm?

"Last week, the American Farm Bureau Federation carefully reviewed EPA's March 25 release of the 'waters of the U.S.' proposed rule. The results of our review are dismaying.

"The EPA proposal poses a serious threat to farmers, ranchers and other landowners. Under EPA's proposed new rule, waters—even ditches—are regulated even if they are miles from the nearest 'navigable' waters. Indeed, so-called 'waters' are regulated even if they aren't wet most of the time. EPA says its new rule will reduce uncertainty, and that much seems to be true: there isn't much uncertainty if most every feature where water flows or stands after a rainfall is federally regulated.

Read more: Could New Regs Lead to Needing Permits to Farm?

Analyzing Oil Numbers in Montana & Dakota

We are often asked whether or not Montana is developing its resources as effectively as our neighboring states, North Dakota in particular. There is a variety of theories that suggest our tax structure is a disincentive, or our environmental laws too strict, or that the Federal government is too involved, or a host of other suggestions. MPA would like to open a dialogue to look at these different theories, starting with taxes, and provide a view from our perspective.

Trying to determine if Montana has a good or bad tax structure for business is not an easy task. Let's take a more detailed look.

Read more: Analyzing Oil Numbers in Montana & Dakota

Public Pensions Headed for Financial Meltdown

Public pension systems across the country may be heading toward a financial meltdown, according to a series of stress tests conducted by a respected hedge fund.

Bridgewater Associates, based in Wesport, Conn., estimates it will take about $10 trillion for public pensions to meet their financial obligations in the coming decades as an aging population retires, but according to Bridgewater's report there is only about $3 trillion in assets to invest.

In order to cover the coming expenses, Bridgewater estimates pension plans would need to earn an annual return of 9 percent.

Read more: Public Pensions Headed for Financial Meltdown

Montana Tax Dollars Pay Lobbyists for Public Agencies

Lobbyists: the only political players arguably held in as low regard as the United States Congress. People everywhere love to hate their influence in state and national politics; but few complaints about them pass the smell test for one simple reason: they do a job few citizens are willing to do, and from which most citizens benefit one way or another.

Are you a "seasoned citizen"? Lobbyists work to influence legislation in your favor. Do you hunt? Fish? Work? If you eat and drink (doesn't matter what, or where, or how much, or how often) someone somewhere wants to pass a law that will impact you. On both sides of every issue are lobbyists. For good and for ill, they are part and parcel of the political landscape in America.

Read more: Montana Tax Dollars Pay Lobbyists for Public Agencies

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