Are there problems if an employee starts a side business?

On Behalf of | Apr 2, 2020 | Business Law |

As a business owner, you might have concerns if one of your employees wants to start up a side business. Some business owners have no issues with their employees setting up their own businesses. However, legal conflict could ensue between you and your employee if your worker takes certain actions that are detrimental to your operation. 

When an employee starts up a side business, it may infringe on your company in several ways. Entrepreneur describes three areas of conflict that you might have with an employee who starts up a side business. 

Violating a non compete 

Many businesses require their workers to sign a non-compete agreement, which keeps workers from creating a competing business while employed, or from doing so for two years after leaving the workplace. If your employee had signed a non-compete clause as part of an employment contract, your worker might be in violation of that contract by starting a business. 

Using company resources 

You might also have a problem with your employee if he or she uses your resources to service a personal enterprise. Such resources may include your company computers, paperwork, or electronics. Some employees may not use company resources but will spend company time working on their own business. Whether your employee uses company resources or time, it may constitute a breach of an employment contract. 

Using your intellectual property 

Your employee could run into legal trouble by using the intellectual property of your company for the purpose of running a business. These may include your trade secrets, patents, copyrights, or trademarks. Employers in various cases have experienced problems with their workers using intellectual property for their own businesses, and have resorted to cease and deist letters or even litigation to pursue damages.