Legal Question in Business Law in California

Non disclosure agreements and/or comprehensive employment/independent contractor agreements are the best. This is a typical problem I advise clients on. The answer ends up coming down to the circumstances of the business.

You should also consider forming a separate business entity to protect your personal assets (if you haven't already). Let me know if I can help you with any of this.

Your best bet with the vendor is to obtain an exclusive territory. The vendor may, however, resist the idea of granting a territory franchise to a start-up company.

The next best bet is to hire salespeople who like working for you and have little desire to run their own business, and keep them happy. It is not legally possible to write an employee agreement that restricts an employee's going into competition with you.

Preventing your employees from learning the identity of your supplier will be virtually impossible in the long run. You'd have to be the first to arrive in the morning, the last to leave, and never take a vacation, let anyone else answer the phone, pick up the mail, or otherwise be exposed to anything that might communicate this information.

The law tends to favor fair competition. Under current California law, you can't have a non-competition agreement that is enforceable against someone that is just an employee (as opposed to someone that owns a stake in the business). One possible tact would be to offer equity to sales people, but that would only be reasonable in limited circumstances. Another direction would be non-disclosure agreements with both employees and your vendor and making reasonable efforts to keep the vendor's identity a trade secret. As Mr. Whipple points out, however, that requires some degree of diligence. I think perhaps Mr. Whipple overstates it slightly in that the law only requires that you make reasonable efforts and clearly identify what is not supposed to be public knowledge outside of your company, but it is still something that would require careful protection. The best approach is the one suggested by Mr. Gibson in relation to exclusive territory but depends on the vendor's willingness to enter into such an agreement. Usually, those may require promises on your side, e.g. minimum purchase quantities. The exclusive territory concept can be combined with the trade secret/non-disclosure concept as I don't want to give the impression those solutions are mutually exclusive. Other options might present themselves if we knew more about your company. In the case of any of the potential solutions, it would be highly recommended that you involve an attorney in drafting the necessary documents.