employees and non-disclosure provisions.
In some cases, all four are necessary to protect the interests of the company.
But remember that if all four restrictions are contained within the contract, the court may determine that the company is adequately protected by the non-solicitation and non-disclosure provisions alone, and may strike the non-competition restriction, unless the company can demonstrate that the non-competition provision protects an interest that is not adequately addressed by the other provisions.
6. Include provisions regarding injunctive relief. It’s generally a good idea to include provisions providing for a presumption that any harm done is irreparable and difficult to quantify. That sets the groundwork for obtaining an injunction in the event of a violation, or threatened violation, of the contract.
This provision will typically state that injunctive relief is in addition to other available remedies.
While these terms are often included as a matter of course, courts don’t always allow a presumption contained in a contract to take the place of a legal finding that there is a threat of immediate and irreparable harm. You should be prepared to satisfy this burden when seeking to enforce your contact.
7. Consider including an attorneys’fee provision. It is advisable to include a provision providing that the company will be reimbursed for reasonable attorney’s fees and costs in the event that litigation is required to enforce the restrictive covenants. This gives an employer a significant amount of leverage in the litigation and will make litigation more palatable when necessary.
8. Include provisions requiring the return of confidential documents and information. Contracts should include provisions requiring employees to return any information or documents relating to the company within a short time following their termination of employment.
These provisions should be broad enough to cover copies, derivations of company documents, and information contained on electronic devices.
You may also want to include a specific provision providing that the employee must return any company-provided electronic devices, including palm pilots, cellular telephones and laptop computers, back to the company In this information age, confidential information is more likely to walk out of the door on a tiny flashdrive or portable storage device rather than in paper form.
9. Include an assignability provision. These provisions generally state that the company may assign the covenant to an affiliated company or successor in interest without notifying the employee. In some states, in the absence of such a provision, the covenant can’t be enforced by a successor or affiliated company.
10. Include language extending the term of the covenant in the event of a breach. If a former employee’s violation of a non-competition agreement is not discovered until months after it has begun, a provision stating that the time period covered by the covenant will automatically be extended by a length of time equal to the time period during which such a violation occurred can provide the company with a means of obtaining extended injunctive relief.
Consulting with an expert and remembering these tips will help you protect your investment in time and training of your valuable human resources -and help you sleep at night.
Risa Boerner and Susan Guerette are with the law firm of Fisher & Phillips LLP, which limits its practice to representing management in labor and employment matters. For more information contact the authors at (610) 363-6667, email@example.com or firstname.lastname@example.org.More frequently, employers are asking or requiring employees to sign non-competition agreements -employment contracts that restrict the rights of employees to set up shop across the street, or take your trade secrets with them when joining a rival.
After training and grooming a green employee into a highly productive and valuable member of the team, employers are frequently frustrated to learn that the employee is now their chief competitor.
Of course, it’s a free country and people are allowed to make a living any honest way they can. Balancing those two competing philosophies is what judges are often called upon to do.
If you are considering establishing a non-competition agreement for your employees, here are 10 things you should think about:
1. Tailor restrictions to the jurisdiction in which the employee works or resides. In some states, a two-year non-competition clause may be invalid, while in others, it’s standard. Some states may permit a customer restriction to take the place of a geographic restriction, whereas others will require a geographic limitation.
These details are important because an overly broad non-competition clause can be fatal to the entire employment agreement in some jurisdictions.
This doesn’t mean that a nationwide company must draft a separate non-competition agreement for each state in which it operates.
A handful of versions -a few for problem” states and others for “typical” states -would be sufficient to account for most variations in the law.
2. Include a choice of law provision. Generally this should be the state where the employee works or resides. Although companies sometimes provide for the application of a specific state’s law and a particular venue, this can be problematic.
The law of the particular state could change and become unfavorable or a court might not apply the law of the specified state if it believes the law of that state is contrary to the public policy of the state where the employee works or resides.
By tying the choice of law provision to the state where the employee works or resides, a company can spread its risk and minimize the chance that the choice of law or venue provision will be rejected or will result in the application of an unfavorable precedent at some time in the future.
3. Tailor the contract to the employee’s position. In most jurisdictions that enforce non-competition agreements, an employer must demonstrate that the covenant is reasonable and protects the legitimate interests of the employer.
An employee with nationwide responsibilities, for example, may merit a covenant with a broader geographic restriction than an employee who works within a narrow territory.
Tailoring the duration, scope, and geographic restrictions of the covenant to the particular position of the employee (or category of employees) is likely to enhance the enforceability of the agreement.
4. Determine what constitutes sufficient consideration for the covenant. Where a restrictive covenant is given to an employee after the start of employment, some states (such as Pennsylvania and North Carolina) hold that continued employment alone is not sufficient consideration for the covenant.
In those situations, new consideration must be provided to the employee in exchange for signing the restrictive covenant. The law is vague in many states regarding what, precisely, is sufficient to constitute adequate additional consideration. It’s a good practice to identify the particular consideration and include an acknowledgement of the sufficiency of that consideration within the contract.
5. Determine what type of restrictions would best serve the interests of the company. Your options may include non-competition, non-solicitation of customers, non-solicitation of