What if one of your employee technicians decides that he or she wants to quit and start their own pest control business? Are you protected?
Many pest control companies utilize non-compete agreements or clauses in their businesses.
What exactly are pest control non-compete agreements? Do they work, and how are they enforced? Are there any drawbacks to using these clauses in the employee hiring process? What about legal issues that come up?
Many questions arise when it comes to pest control non-competes. In part one of our look at pest control non-competes, let’s take a closer look at the employers or PCO’s perspective:
Pest Control Non-Compete Agreements
A non-compete agreement or clause is a contract under which an employee (in this case a pest control employee or technician) agrees not to enter into or start a similar profession that is in competition against the employer, or PCO. It basically prohibits a current or former pest control employee from starting a similar pest control business in your competitive markets.
The majority of states in the U.S. recognize and enforce various forms of non-compete agreements. A few states, such as California, totally ban or prohibit non-compete agreements except in limited circumstances.
Reasons To Use A Pest Control Non-Compete Agreement
The reason for having your pest control employees or technicians sign a non-compete agreement is simple. You must protect yourself and the business you’ve put so much time, capital, and effort into.
Owning or managing your own pest management company comes with many risks. One such risk is the possibility that upon an employee’s termination or resignation, they might begin working for a direct competitor or even start their own business. By doing so, this former employee can gain a competitive advantage by exploiting confidential information about their former employer’s operations, trade secrets, or sensitive information such as customer lists, business practices, most effective products, and marketing plans.
The purpose of having your technicians sign a non-compete agreement or clause upon employment is an attempt to prevent this from happening. This protection allows the PCO to hire, contract and otherwise operate a pest control business without fear that the business knowledge and advantages will soon be used against them.
The biggest concern I hear from PCO’s when it comes to employees leaving their companies and starting their own businesses, is taking customers with them when they go. These technicians develop close relationships with the customers on their routes. These customers trust their technicians, and these technicians know exactly what the customer’s wants and needs are. Many will follow a tech when they leave.
When this situation occurs many legal and ethical issues arise. As the owner of your pest management company, you paid for the trucks, the insurance, the chemicals, the training, the customer service reps; basically all of the overhead. You’ve also spent advertising money, paid sales commissions, and paid for online marketing in order to attain these customers, but also retain them. When a former employee takes these customers, it can be construed as theft.
Drawbacks Of Pest Control Non-Compete Agreements
One of the biggest disadvantages of non-competes is that they can be incredibly difficult to enforce. Enforceability can even depend on the state. Like I mentioned before, a few states (California), employment related non-competes are illegal.
Pest Control Non-Competes & Legal Issues
As mentioned, the enforceability of a non-compete may require legal action. As the owner of a pest management company, you must evaluate the cost of suing your former employee who is breaking a non-compete agreement. You also must determine if there is any chance of actually getting paid; which may be unlikely if your former employee is just starting out and has very little capital. Usually the costs are higher than your losses, and even if they win, you may never get paid.
Every pest control business should have legal representation. Consult with yours to ensure your non-compete agreement, or any other legal document for that matter, meets local, state and federal requirements.
I’m hearing more and more from pest control operators, that they are changing their strategies when it comes to non-compete agreements. Many have changed from non-compete agreements (which are VERY difficult to enforce) to non-SOLICIT agreements. One such agreement will state exactly what the PCO wants– That a former employee can’t solicit the customers you invested resources and time in getting. They seem to be a little easier to legally enforce.
I’m also hearing that some PCO’s are beginning to use confidentiality agreements; which are very similar in nature. Every state is a little different, so do some research and find out which contract is right for you and your pest control business.
The topic of pest control non-competes is a difficult one; full of ethical and legal issues. No PCO wants to lose their hard-earned customers to anyone else, so look to non-compete agreements; or better yet, consider a non-solicitation agreement instead.
Consult with your company’s legal representation to ensure your non-compete or non-solicit agreement meets local, state and federal requirements.