Non Compete Agreements and Insurance

Non Compete Agreements and Insurance

As a small business owner one agreement that you can have in place to augment your general liability insurance is that of a non-compete agreement with your employees. Below please find some basic principals regarding these agreements.


The laws regarding these agreements vary by state. The general rule of, is that you cannot prevent ex-employees from making a livelihood.

Usually the contractual liability provision within your general liability policy portfolio will not cover contractual relations between the owner and their employees.

Lawsuits that arise from this contractual liability exposure are best handled by a carefully designed employee handbook by a competent labor law attorney. Trying to find insurance to fill the gap for a poorly written employee handbook is usually an exercise in futility.

A few key elements to consider drafting an employee handbook with your attorney should be:

* what is the worst-case scenario in damages if this employee were to leave

* consider paying the money to the employee in this agreement

* have privacy policies signed by the employees

* have signed intellectual-property agreements

* have signed producer and/or sales persons agreements

The more signed agreements the better. Having restrictive passwords and strict client access policies in place can help safeguard your intellectual property.

One insurance policy that should be considered in light of these employee negotiations would be for the business owner to have a policy in place called “employee dishonesty policy”. While the employee handbook will protect you in court having an employee dishonesty policy in place could provide the needed cash flow from losses.

By Robert    Watson

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