As summer winds down and the temperatures cool, many parts of our economy and the business world tend to heat up. The heat typically starts on the gridiron, where rabid fans of college football begin to analyze every important snap of every important play for their very important team. The analysis continues for every snap of the rivals of their very important team (and perhaps some snaps of other conference foes or even – dare we suggest – the snaps of teams in other conferences). My law firm opened its first office in Birmingham, Alabama more than 100 years ago and now has offices through the southeast. Trust me on this: the heat starts on the gridiron.
College football aside, companies often want to conclude deals before the close of their fiscal year, or before the end of the calendar year. Bank of America Merrill Lynch recently reported (amid questions of whether anticipated rising healthcare costs would impede growth) that “Economic optimism is the highest in five years, and global business abounds…” Many companies assess their cash positions and take the opportunity whenever possible to purchase items at the close of the year in order to use the capital expenditure to reduce income taxes. In the world of commercial litigation, summer schedules (and the inevitable summer vacations) give way to longer hours, increased numbers of evidentiary hearings and trials, and an array of settlement conferences and other forms of alternative dispute resolution intended to clear the slate of 2013 in preparation for the new business ahead.
Our clients typically take this opportunity to plan for the upcoming year. Budgets are in the works. Forecasts are made. Among the forecasts is often the question: “Who will take over my business when current management decides to retire?” And thus we segue into succession planning and the value of non-compete agreements to this discussion.
While a non-compete agreement is intended to ensure that a departing employee does not steal away to a competitor to the detriment of the former employer, it also provides an excellent opportunity to secure strong leadership in succession planning. It goes without saying that an excellent employee who perceives little opportunity for future advancement is more likely to seek opportunities elsewhere than an employee who genuinely has an opportunity to advance within the company’s leadership. When an employee’s contract limits the ability to compete within certain industries or within a certain geographic area for a defined period of time, the knowledge of that possible restraint can make the open door to advancement appear all-the-more attractive.
It is important, therefore, to regularly review your non-competition agreements. Are there employees within your organization who are ready for more involved leadership positions? Consider whether or not these employees are so vital to the business that their departure would immediately have a negative impact on the company’s bottom line. Consider also whether the company would benefit from a planned, informed and intentional transition from current leadership to future leadership. Although having a non-competition agreement in place is certainly no guarantee for a smooth transition from the existing regime to a company’s new leadership, the argument certainly exists that having a carefully drafted and impactful non-competition agreement in place can allow you to initiate important conversations without the fear that current employees will prematurely head for the doors.
Yes, the economy is heating up. As is the football season. If your company is also experiencing growth, consider this a good time to do some planning of your own. If you believe it is important for your favorite football team to put together a game plan intended to defeat its weekend opponent, then you surely must also recognize the importance of planning for your own business. This is the part of the blog where you are encouraged to seek a professional’s advice to discuss non-competition agreements and how they could impact and benefit your own business planning.
If you would like additional information on non-compete agreements and trade secrets law, please contact one of the Burr & Forman Non-Compete & Trade Secrets team members.