How To Lose Your Small Business in 10 Days – Day 5

Categories: blog

Luigi Writes a Non-Compete  

Yoshi’s newly hired employees (and independent contractors) have begun their training as either pizza cooks or plumbers. However, being such a unique business, Yoshi has taken the time to train each employee individually on how to perform up to Plumbing & Pizza Delivery’s expectations. Then, soon after the one-on-one training is complete, Yoshi sends off the employees (and independent contractors) to commence working.

Only days after rolling out the new labor force, Yoshi began to hear rumblings among his employees that Bowser, a long-time plumbing competitor, was aggressively trying to break into the pizza business. Intrigued by the Plumbing & Pizza Delivery business model, Bowser has been approaching Plumbing & Pizza Delivery employees to ask questions about their training and pay.

That same day, Yoshi informs Peach and Luigi about the rumors regarding Bowser, causing Luigi to immediately download a generic “Non-Compete” from the Internet for all of the employees and independent contractors to execute.  Wanting to encompass as much as possible in the Non-Compete, Luigi adds on to the downloaded form by writing, “After quitting or being laid off from Plumbing and Pizza Delivery, for a ten year period, I will not work for or start my own plumbing or pizza company, anywhere in the United States.” Peach agrees that such a wide restriction should help scare their employees from working for Bowser. Yoshi on the other hand, wonders if they should have an attorney look at it before handing it out to their employees. Ignoring Yoshi’s concerns, Peach and Luigi hand out the Non-Competes and require all employees and independent contractors to sign them, in order to keep their jobs.

Despite their intent to protect their business, Luigi and Peach have done quite the opposite. By drafting their own overly broad and unenforceable Non-Compete, they have given themselves the false hope that their employees could not work for a competitor, while continuing to invest time and money in training and preparing their employees.  All time and money that they have failed to protect properly.